What it is
Simply put, purchasing power is how much goods and services your money can get you.
The technical definition is the value of a currency based on how much goods and services one unit of it can buy. Also called buying power, it changes over time as prices go up or down.
Let’s say you set a budget of P3,000 for groceries every week. If the total price of your usual groceries goes up by 10% from one week to the next, you’ll have to pay more money for the same goods.
You can also choose to remove some items from your basket to stay within budget. This is one example of how purchasing power is affected by factors like inflation.
When prices go up, your money can’t buy as many items and its purchasing power goes down. But when prices go down, purchasing power goes up and the same amount can buy more things.
What it means for you
How far your money will go is influenced by its purchasing power. In turn, there are different factors that affect purchasing power, like inflation and deflation.
It could also change due to certain events, such as the passing of new laws. For example, if the government imposes new taxes on all imported goods, prices of a lot of items will likely go up.
As a consumer, you are directly affected by the purchasing power of money. You may notice how your money can’t buy as many things as it used to, especially during periods of high inflation.
To help you cope, there are ways to beat inflation like adjusting your budget and looking for options to grow your money.
It also helps to stay aware of the cost of living in your area so you can make changes as needed.
.jpg)
