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Answer :
Which items experienced:
1.1 the highest inflation
- Transportation (petrol) experienced the highest inflation at 27.78%.
1.2 the lowest inflation
- Groceries had the lowest inflation at 4.35% when considering items with any inflation. However, Car Insurance experienced 0.0% inflation, indicating no change at all, which some might consider as the lowest.
1.3 no inflation
- Car Insurance had no inflation, with a 0.0% change.
Show how the inflation rate of 27.8% has been determined.
The inflation rate is calculated using the formula:
[tex]\text{Inflation Rate} = \left( \frac{\text{Current Cost} - \text{Previous Cost}}{\text{Previous Cost}} \right) \times 100[/tex]
For Transport (petrol):
[tex]\text{Inflation Rate} = \left( \frac{2300 - 1800}{1800} \right) \times 100 = 27.78\%[/tex]
Work out how much more this individual would need to earn per month to cover their increased expenses.
First, calculate the total increase in expenses for each item:
- Transport increase: R2,300.00 - R1,800.00 = R500.00
- Groceries increase: R3,600.00 - R3,450.00 = R150.00
- Medical Aid Insurance increase: R2,062.00 - R1,875.00 = R187.00
- Car Insurance increase: R427.30 - R427.30 = R0.00
- Electricity increase: R660.00 - R620.00 = R40.00
- Clothing increase: R580.00 - R500.00 = R80.00
- Accommodation rental increase: R3,520.00 - R3,200.00 = R320.00
Total increase = R500.00 + R150.00 + R187.00 + R0.00 + R40.00 + R80.00 + R320.00 = R1,277.00
Thus, the individual needs to earn an additional R1,277.00 per month to cover the increased expenses.
Express the additional salary as a percentage of the original salary.
The percentage increase is calculated as:
[tex]\text{Percentage Increase} = \left( \frac{\text{Additional Salary}}{\text{Original Salary}} \right) \times 100[/tex]
[tex]\text{Percentage Increase} = \left( \frac{1277}{16750} \right) \times 100 \approx 7.62\%[/tex]
Why is this percentage lower than the percentage value of 10% regarding the inflation rate for the total of all the items?
The overall inflation rate of 10% is an average rate taking into account all costs, including those that did not change or increased by smaller amounts. The total additional salary needed (R1,277) as a percentage of the current salary is not just about the nominal inflation percentage for each item but the aggregate increase against the overall salary.
If this person is offered a 6.5% increase in salary, should they accept the offer or negotiate for a different increase?
A 6.5% increase of a R16,750.00 salary results in an additional:
[tex]\text{Increase} = 16750 \times 0.065 = R1,088.75[/tex]
This amount (R1,088.75) is less than the total needed increase of R1,277.00. Hence, to meet all increased monthly expenses, they would need to negotiate for a higher increase or find ways to reduce expenditure or supplement income elsewhere.
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