Downsizing mainly affects those above 40-year-old as well as loyal consumers of the affected brands. This type of consumer finds it difficult to change their brand due to a lack of trust in other brands. In addition, some of these consumers do not realize the downsizing, and in case of packaging changes, they believe that changes are done to improve the brand’s quality. Although downsizing has worked for most producers, it is considered unethical pricing. A perfect example of unethical pricing is Coca-Cola brands which has reduced its 500ml beverage to 450ml without adjusting prices or notifying its customers.
The rise in prices has eroded the purchasing power of my income because I can purchase lesser items compared to products I used to buy earlier. In addition, my family and I have found it challenging to save since almost all our income is being spent on basic needs. With the increase in prices, some businesses will reduce their profitability. The businesses that will be affected offer goods and services that are not basic needs for a household. These effects will be caused by a reduction in sales due to consumers reducing consumption.
The rise in prices will negatively affect the economic recovery because it indicates high inflation that signals an overheated economy. Due to increasing prices, economic growth will be slow since businesses and consumers will spend less on goods and services. Therefore, inflation will reduce consumer demand and consumption, leading to an economic recession. In addition, this year’s economy expects some closure of some businesses and a significant decrease in consumption since there is a high inflation rate. This indicates that the inflation outlook will be concentrated on the upside since food and fuel prices are increasing. Inflation is expected to increase next year due to the continuous growth of Indian and Chinese markets.