Impact of price hike over middle class family

Chapter 1

Introduction

1.1 Introduction
The rate of inflation- the percentage change in the overall level of prices-varies greatly over time
and across countries. In economics, inflation is the rate of increase in prices over a given period of
time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in
the cost of living in a country. Inflation affects consumers most directly, but businesses can also
feel the impact. Inflation is not limited to price spikes for any single item or service; it refers to an
increase in prices across a sector, and ultimately, a country’s economy. Inflation influences every
country, negatively as well as positively. But in most cases inflation is an important factor leading
to social and economic instability and disorder. Bangladesh is a small country with a huge
population. Bangladesh is a developing country. Inflation can be caused by the sudden disruption
in supply of products by sudden natural disasters like flood, tsunami, draught, shortage of power,
raw materials etc. An increase in money supply is the root of inflation. It can also be caused by
increases of aggregate demand than supply. Impact of global price hike is one of the most important
causes of price hike in Bangladesh.

Inflation means a continued increase in the aggregate or general price level in an economy.
Inflation means there is an increase in cost of living. On the other hand, a price hike is the increase
of any single product or service price when most prices grow, there is inflation.

A standard of living is maintained by a certain level of wealth, comfort, material goods and
necessities available to a certain socioeconomic class in a certain geographical area. The
socioeconomic classes are determined mainly by the income levels of population.

Middle income people stand in the middle of high income who enjoy a high standard of living and
low-income people who maintain a low standard of living. They have the financial security to
make both ends meet and have a little margin of safety. Middle class is essential to maintain the
demand of the products. In Bangladesh, most of the families are middle clan families. Day to day
increase in prices of commodities snatch money from savings of consumers and uncertainty of
prices, both food and nonfood items, generate tension among middle income people. They have
intentions to search the alternatives toward earning more and more. The middle-class family in
Bangladesh faces unprecedented cost of living crisis which makes it increasingly difficult to
survive. As wages remain stagnant, the cost of living has skyrocketed, creating a situation in which
the middle class is struggling to make ends meet. The study is to identify the alternatives selected
by the middle class in different levels of price hike in their daily essentials like food,
accommodation, education etc.

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It is obvious nowadays that the price of everything ranging from essential daily commodities to
transportation, educational, medical, and other expenses are increasing. Inflation hits the poor
harder than the rich because of high expenditure- income ratio, low purchase, essentials becoming
unaffordable, weaker bargaining power in compensating the price hike. The suffering of the middle
class is almost similar to the poor. Inflation caused a drastic change in the lifestyle of middle-class
families. Hence, the study gains importance by studying changes that inflation has caused among
the middle-class people and the remedial action that the people and remedial actions that the people
have adapted to cope up with the price hike problem.

1.2 Rationale of the study

Inflation in recent years has affected the life of people and the country’s economic stability. The
economy of Bangladesh is prospering successively. One of the indicators behind the GDP
measurement is inflation. Inflation effects highly on the consumption pattern and economic
behavior of people. So, the study gains importance by studying the changes that price hike caused
among middle class people and how people cope up with inflation behind price hike problem.

1.3 Objective of the study

The main objective of the study is to measure the impact of price hikes on the standard of living of
middle-income people.

There are some specific objectives: 1. Reasons for price

hikes in view of respondent.

2. To identify crises of middle class.

3. To identify the response of households in their purchase habit of food items in the time of
prices hike

1.4 Limitations of the study

Limitations are influences that the researchers cannot control. Every study has some limitations.
In preparing this report the researcher faced some problems and limitations which are summarized
as follows:

1. Time constraint is the main limitation of the present study. The time provided for the
conduction of the present study is not good enough. The researcher had to complete the
research work within a short period of time.
2. The present research is mainly based on primary date. To collect primary date the
researcher had to visit to many households, but all house holders are not educated and well

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 concerned, and all are not fully cooperated the researcher faced misconception and
misleading information about income, expending and savings.
3. Funding problem is another problem of the present study. The researcher faced the problem
of fund shortage.

Though there are some limitations, the present study can be used as a primary source for adopting
appropriate polices and take programs to enhance the economic progress and well-being of the
general people.

Chapter 2

Literature review

1.Increase in fuel price will increase food price. Increase in petrol price will increase the
transportation cost, increase in transportation costs will increase in price of goods would gradually
force the people to loosen their pockets and soon like this, the chain will further propagate this ups
and downs push more people into poverty. The community that suffers the most is the common
people. (Rajendra Kumar Mahore,2015)

2.Due to the increase in food prices, inflation is up in many countries and the external balances of
most net commodity importers have deteriorated. These are affecting the net food importing
developing counties very badly. The short-run impacts of higher staple food prices on poverty may
differ considerably by commodity and by country, but poverty increases are much more frequent
and burger, than poverty reduction. The recent large increases in food prices appear likely to raise
overall poverty in low-income countries like. Bangladesh substantial. (Shakib,2012)

3.Other important cause of price hike and inflation is the haphazard money supply in the economy
(Hunain, 2018).

4.The middle-income people referred to by middle clan supposed to have high education, medium
business or are retired professions. They are non-manual labor, salaried and highly skilled
selfemployed in the occupation structure (Siddiqui etal.1990).

5.It is found that inflation has both positive and negative impact on the economy (Mehrara and
Moghadasfer,2012).

6.In Bangladesh mainly their important reasons for unabated inflations are identified as.

a. Excess money supply,

b. The structural issues of market-cartel and exportable behavior of actors and
c. External shakes (Murshed, 2007)

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7.Inflation or increase in price level of essential products of households is occurred due to high
fiscal deficits, poor monetary policy, unsustainable public borrowing, volatile exchange rates,
demand push or supply push of products or services. The stag nation of economy is inevitable if
the middleclass people are failed to afford their consumptions during inflation period
(Mohammed hanif,2016).

8.High prices of food commodities, fuel and gas are having a compounding effect on already
vulnerable people in Bangladesh, especially women and girls who often eat last and least. Without
quality food and skipping of meals, women struggle to stay healthy enough to provide income for
their families and girls miss out on school due to sickness. For the children, malnutrition can cause
permanent, widespread damage to their growth, development, and overall wellbeing, particularly
in the first five years when their brains develop most rapidly. (SHOUHARDOIII program, 2022)

9.When middle class people were ready to cut expenses on entertainment, to prepare budgets and
contract their spending they were not ready to compromise with children’s education and medical
car of the family members, especially children. The middle people have agreed that their lifestyle,
spending nature were affected by inflation. (Dr. K. Kumaravel, 2014).

10.Despite certain variation by commodity and by country, the fact is that most poor are net
consumers of food and as such tend to be hurt by higher food prices. This conclusion is much more
obvious for urban households where farming is much less dominant. While it is possible that higher
prices of staple foods could lower poverty by raising the incomes of some poor farmers, this effect
was, in most because we considered, offset by adverse impacts on poor households that were not
buyers of food. (will martin, 2008).

11.Inflation uncertainly affects the output growth dynamics. The first and the second moments of
inflation have a negative and regime dependent impact on output growth; uncertain effects are
significant during the recession state but not in the expansionary regime. (Mustafa Caglayan,
2012)

12.Price inflation highly restricts the public in terms of utilizing their basic needs and day to day
activities like use of public transport, eating out at restaurants, movie going habits, impact on
electricity bill, medical expenses etc. (Sanjay Dixit, 2015)

13.There has been a considerable drop in production of everyday items compared to the pre-
pandemic period. Concerns about growth slowdown emanate from decline in production of daily
usage items. Prices of these products are elevated, hurting the middle class the most (Ravi Dutta
Mishra, 2022)

14.The natural disasters that disrupt the production of agricultural products crates crisis in the
supply of food items. The failure of government in compensating the shortage for inefficiency or
worldwide paucity accelerate ate the price hike and peoples’ sufferings (Rahmans and Ahmed,
2008)

Most of the studies about the effects of inflation in middle class families do not observe the mental
behavior of the members of the family. Most of the study is based on the food consumption sector.

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There are some studies which educational sector also. But there are many more side effects of
inflation which are not given importance to the study.

There are some other sectors in which every person needs to expend. They are recreation, medical
facilities, transportation services etc. These sectors remain unstudied. Again, the researches are
mostly based on rural and urban area families. But marginalized community families remain
unstudied about the price hike problem in most of the study. So, I think this area is also needed to
study as they are also a part of our country.

Most of the studies about the effects of inflation in middle class families do not observe the mental
behavior of the members of the family. Most of the study is based on the food consumption sector.
There are some studies which ass educational sector also. But there are many more side effects of
inflation which are not given importance to the study.

There are some other sectors in which every person needs to expend. They are recreation, medical
facilities, transportation services etc. These sectors also need attention. These sectors remain
unstudied. Again, the researches are mostly based on rural and urban area families. But
marginalized community families remain unstudied about the price hike problem in most of the
study. So, I think this area is also needed to study as they area also a part of our country.

Chapter 3

Methodology

3.1 Data Collection Source and method

The study is a quantitative study relied on the primary sources of data. The stratified probability
research is adopted to get the opinion of people of different professions regarding their course of
action in time of inflation. Researcher developed an interview schedule containing open ended and
closed ended questions. The validity of the questionnaire was tested by senior researchers of that
field.

3.2 Structure of the research

This research is quantitative and descriptive analytical research done on the basis of thinking of
the respondents regarding the steps to be taken in the face of price hike of essentials. Data was
collected from various sources, and it was explained in detail with related tables, graphs and
necessary written information is also available here. Researcher went too many middle-class
families and tried to collect the data and information about the impact of price hikes.

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3.3 Research Design
For the study researcher developed a research design in the following way.

3.3.1 sample criteria

• Age 20 years and above

• Regardless of sex
• Middle socioeconomic class

3.3.2 sample size

50 respondents (male and female) randomly selected.

3.3.3 Area coverage

The middle-class families of Rajshahi division have been considered as the population of the
research.

3.4 Data collection

The middle-class families of Rajshahi Division have been considered as the sampling frame. This
frame was based on the claim of people rather than original income range because the researchers’
viewpoint on the expenses habit of people. They claimed that expenditure pattern depends on the
perception of people about their income status. The researchers have tried to collect data from 50
respondents and were able to collect form 40. Three of the interviews were cancelled due to
inconsistency in the answers.

3.5 Analysis Procedure

The information was processed through Microsoft excel 07 and SPSS to get the outputs in the form
of frequency distribution, cross tabulation.

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 Chapter-4
Data Analysis and findings of the study
The purpose of this research is to find out the impact of price hike over middle class family. The
increase in food and nonfood prices erodes the purchasing power of the poor. The impact of price
hike of essential commodities on high and low income groups is different because of different
consumption levels and patterns.We have selectd the people with fixed income with limited
scope of alternative source of income.They have to cut out some food items they used to intake
because of price hike. They are maintaining alternative food items also.

Table 1 : Showing impact of price hike on food items

Impact of price, rise on food budget
Response Frequency Percentage
Increased 37 92.75%
Decreased 1 2.5%
Remain Same 2 5%
Total 40 100.00%

Table 2 :Effect of price rise on different items

Response Frequency Percentage
Meat 5 12.5%
Fish 5 12.5%
Vegetables 10 25%
Fruits 20 50%
Total 40 100.00%

Table 3 : Scope of purchasing food items due to price rising

Response Frequency Percentage

Increased 3 7.5%
Decrease 21 52.5%
Unchanged 16 40%
Total 40 100.00%

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 Table 4 : Impact of price hike on electricity bill

Response Frequency Percentage

They have decreased 0 0%
They have increased 39 97.5%
Remained Same 1 2.5%
Total 40 100.00%

Table 5 : Impact of price hike on recreation

Response Frequency Percentage

Increased 5 12.5%
Decreased 11 27.5%
Remain Unchanged 24 60%
Total 40 100.00%

The scope of purchasing food items decrease 52.5% which is a big number.Many people do
budget of family expenses and it is 92.5% . People consume less meat, fish and vegetables. The
most less consuming is fruits which is 50%. In recreation the price hike has also effected. Most
of the middle class families do not go to recreation. The result is unchanged which is 60%. There
is decrease also which is 27.5%. The electricity bill also increased to 97.5% due to the result of
price hike. Due to the result of price hike the prices of medicines and medical fees have also
increased. All the middle class families expense in in has increased which is 100%. In every
family there are people who are suffering from illness like high and low blood pressure ,
diabetics, back pain , knee pain etc. The reasons people think most is the irresponsibility and
corruption of the market syndicate , it is behind the price rising of the commodities . It is almost
37.5% . Many also suggested wars which is almost 20% and 27.5% suggested both as the reasons
of rising price of commodities. Nearly 75% of middle class families have been forced to squeeze
their budgets for fruits, vegetables , meat and fish because of consistent high prices . 90% people
say that their food budget has increased due to price rise . Recent price hikes responsible for
growing social crises also . Moreover , price hikes increase , Social and economic discrimination
as well as creates various social classes .

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 Figure1 : Indicating reasons for the rise in commodity prices
and price hike

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20

27.5

37.5

Wars Irresponsibility and corruption of market syndicate Both Others

Chapter-5
Conclusion and Recommendation

5.1 Recommendation
It is obvious that the price of everything ranging from essential daily commodities to educational
, medical and other expenses are increasing . To help people overcome this economic crisis from
all walks of life should come forward and take necessary steps against this price hike. Following
steps should be taken as a quick action .

1) Growth rate of population control

2) Overall control of malpractice
3) To remove unemployment problem
4) Provide more importance on agriculture sectors
5) Consider corporate taxs rate
6) Control business syndicate as well as stockiest who create artificial crisis in market

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5.2 Conclusion
Price hike of essential commodities has been a matter of constant concern for people of
Bangladesh.Due to increase in food prices, inflation is up in many countries and the external
balances of most net commodity importens have deteriorated . They are affecting the net food
importing developing countries very badly . The middle income people in our country are most
sufferers as they are they tend to maintain their social status ad standard of living with their
minimum savings. The reactions of the respondents are significantly different in the earning , food
expenses and educational expenses. So , the entrepreneurs and the authorities have to take
necessary measures to minimize the impact of price hikes to facilitate to help the middle income
people in maintaining their living standards. The stagnation of economy is inevitable if the middle
class people are failed to afford their consumptions.

REFERENCES
1.How inflations affects the common man- NDTVProfit.com profit.ndtv.com/…/article-how-
inflation-affects-the-common-man-31079
2.Inflations Impact on the middleclass-Livemint www.livemint.com/Politics//Inflations..impact-
on-the-middleclass.html
3.Petrol price hike and it’s effects on our day to day life
www.civilserviceindia.com>subject>ESsay
4.The impact of commodities price hikes on poor and extreme poor households SHOUHARDOIII.
5.Lokanathan, V(1989). Principles of Economics , New Delhi : Chandand Company Ltd
6.Murshed,N.(2007). Inflation and price fixing , Forum , September 2007, PP. 14-17
7.Siddiqui (1990) .Social Formation in Dhaka City, Dhaka : University Press Limited
8.Sadiquellah, A.M.M. (“Price hike and People’s Attitude”, The Daily Star , Popular Daily English
Newspaper of Bangladesh [online].

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