CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Inflation is one of the major topics studied in economics. We are engaged in a number of activities from which we earn income. Some people are professionals such as lawyers, Teachers, Engineers, Doctors and Accountants while others are not. There activities are often related to economics activities.
Adam Smith (1978) defined economics as an inquiry into the nature and causes of wealth of nations. To him economics is concerned with wealth making.
According to H. J. Daveport (1978) economics is a subject that treats phenomenon from the stand point of price. This definition emphases exchanges and seeks to explain that economics deals with things that have a price value which, implies that for any community or services to be of any economics importance, it must have a price attached to it.
Infact the knowledge of economics enables us to give practiced in relation to scarcity and wants and it also enables an individual to take right decision on how to spend his money.
The changing value of money has important consequences for people and for economics activities.
Inflation can be defined as a condition in which supply persistently fails to keep pace with the expansion of demand.
Okeke (1987) defined inflation as a continous rise in price. This is to say that we have enough money but when there are not enough goods and services to meet the demands of buyers, the price of goods and services that are found will rise.
The condition of imbalance between the supply and the demand of those goods will depend on the extent of the rise in the prices of the goods and services. It is a state of disequilibrium in which too much money is chasing few goods.
According to Eze (1991) inflation could be defined as a condition when the price of goods, production factors and services increased to astronomically. This can happen to the quality of money in circulation is greater than goods and services.
That means that purchasing power is increasing when the quantity of goods and services are not increasing proportionally, making it to general rise in price.