Eggs prices certainly included within the CPI basket of food, beverages, and tobacco as an inflation volatile food. Moreover, within the basket, it abruptly takes a large portion of 0.69 (Figure 3).
However, higher prices of one or two goods do not count as inflation unless the increase spreads to (or raises the prices of) other goods. Hence, it is strongly suggested that the high cost of eggs persists due to inflation-driven increases in labor expenses, transportation costs, and the price of chicken feed.Â
2. The Basics of Inflation: Behind Mere NumbersÂ
Before we explore further on this topic, it is important to understand what inflation is and why everyone should care about it. First, let us talk about money. Physically, money is simply paper. It derives its value from the market players' perceived value which includes the Household, Firms and the Government (Asmundson & Oner, 2012). Its perceived value could change thanks to the dynamic of supply and demand for which is signified in the current prices in the market. Should the "overall price level rise and the value of money fall", it is called Inflation (Mankiw, 2021). Inflation plays a big role for everyone as it dictates the nature of the driving factor of our economy: money.Â
Inflation, in percentage, is measured using Consumer Price Index for which is defined as the average change in price of a set of commodities (BPS, 2023) including eggs. Commodities included in the CPI, formally called the market basket, Â must be a commodity often used by a household for which it will decide its set and formula on a survey conducted by BPS (Wahyu et al., 2017). As mentioned, common food such as eggs and meat is likely to be part of the market basket as it is a common purchase. As prices in food are a big component of Inflation that plays greatly on the lives of citizens, Food Inflation is usually also measured (BPS, 2023). These data will then be published publicly by the government to assist citizens in their financial decision.
3. The Egg Price Index: Letting The Data SpeaksÂ
Thus this is why we can look up the prices of food commodities, one of them being broiler chicken eggs, an essential livestock product in Indonesia. According to Presidential Regulation No. 71 of 2015, broiler chicken eggs, as a staple commodity, have a high level of fulfillment and support the welfare of the community (Putera, 2022). This is why the prices of eggs are relevant. On top of that, as previously mentioned, there exists a notable correlation between egg prices, the Consumer Price Index (CPI), and inflation. To better understand this connection, let's delve into what the CPI represents.
The CPI, or Consumer Price Index, essentially measures changes in the cost of living over time. It's calculated by determining the value of a typical "basket" of goods and services in the current year and comparing it to the value of that same basket in the prior year. This comparison is an essential part of the formula used to calculate the inflation rate.
To clarify, the relationship between egg prices and the CPI becomes evident when you consider that any significant change in egg prices can influence the overall annual CPI. The CPI is a key component in the calculation of the inflation rate, which is derived from the formula: (New CPI - Prior CPI) divided by Prior CPI, all multiplied by 100. This formula illustrates the impact that fluctuations in the prices of goods, like eggs, can have on the broader measurement of inflation since one way of measuring inflation is defined as the change in the prices of a basket of goods and services that are typically purchased by specific groups of households (OECD, 2023). After understanding that, now let us take a look at several figures to better map the egg price situation:
