Purchasing power
Purchasing power is the ability to purchase goods and services with a given amount of money. In other words, it represents the ability of an individual or a community to purchase goods and services based on the real value of the money they possess.
Purchasing power is mainly influenced by inflation and the change in prices of goods and services over time. If inflation is low or stable and prices remain constant, purchasing power tends to remain stronger, as people can buy a similar amount of goods and services with the same amount of money. However, if inflation is high and prices rise rapidly, purchasing power decreases, as people have to spend more for the same goods.
The consumer price index (CPI) is a common tool used to measure inflation trends and their impact on purchasing power. The CPI tracks changes in the prices of a basket of representative goods and services, making it possible to assess how average household expenditure varies over time.
The concept of purchasing power is important in economics, monetary policy and individual financial planning. Wage and income increases are often evaluated in relation to inflation trends and purchasing power, as it is essential to understand how much can actually be purchased with the money earned.
