Why Inflation Hurts the Aged Maximum

  There is a convincing reason for the aged to work even after retirement from work in certain countries especially if their retirement benefits are not large enough and inflation is more than the optimum level. Inflation at best captures average price of a predetermined basket of goods. Individuals, however, have different preferences for goods. Even if inflation is kept at the optimum level, it might affect certain people unfavorably if their preferences for goods are on the wrong side. For example, if a retiree just makes both the ends, an increase on house rent of $20 per month, will force the retiree to cut his consumption of preferred goods or to find alternative residence. In both the cases, the retiree forgoes satisfaction by reducing usual consumption considering the logistic cost involved in shifting the residence. On the aggregate level, it is negative for the economy. As inequality in many advanced and developing countries widens more and more in recent times, a favorable s