The effects of inflation on consumer behavior

Abstract

Inflation's primary effect on consumer behavior lies in its erosion of purchasing power. As prices rise, consumers often experience a reduction in their real income, prompting adjustments in their spending patterns. This study delves into how consumers adapt to inflation by altering consumption habits, prioritizing essential items, and seeking cost-effective alternatives. Furthermore, inflation can affect consumer sentiment and confidence in the economy. As inflationary pressures intensify, consumers may become more cautious about their financial future, leading to changes in saving and investment behavior. This abstract explores the psychological and behavioral aspects of inflation on consumer attitudes and expectations.