K-State and Manhattan area students received unpleasant news yesterday after the K-State Economics Club released its annual Student Price Index, which revealed a 3.7 percent increase in the price of goods purchased by K-State students from 2011 to 2012.
“Tuition is probably the component in the index that will most drastically affect the most people, although the rate at which it increases has slowed a bit,” said Daniel Kuester, director of undergraduate studies in economics. “We put these numbers together so that students could see the effects that inflation has on what they pay in their daily lives.”
The index, which was originally started a decade ago by the KSU Economics Club, shows annual price changes in common staple consumer items and services purchased by students in the Manhattan area. Items on the list include gasoline, groceries, tuition, beer, housing, textbooks and movies. Since the index was started in October 2002, prices for items and services on the list have gone up 85 percent.
The largest increase in price this year was in Internet services, which rose by 8 percent from 2011.
“For me, this is my first year living outside of the dorms or a sorority,” said Alexis Lundy, junior in family consumer science education. “The thing that I found to be most expensive or that caught me most off-guard was to see how much more expensive groceries are these days.”
According to Kuester, the Federal Reserve sets a core inflation goal of about 2 percent, an increase he said most experts and government officials consider a healthy level of inflation.
“People will argue otherwise, but I can tell you that it is important to have a certain amount of inflation in our economy,” Kuester said. “You definitely don’t want to have deflation, because that will scare people into holding onto their money and not helping the flow of money, which could cause a lot of other problems.”
Different industries react differently to changes in the market on a year-to-year basis, Kuester said. Textbooks, for example, actually decreased in average price compared to 2011, a change that could be attributed to more online stores, cheaper production costs and increased availability to substitutes like electronic books.
If goods and services can easily be replaced, it is much harder to increase prices without acquiring the risk of significantly reducing demand, Kuester said.
This concept can be seen in play when looking at the inflation levels for the pizza industry in Manhattan; according to the SPI, prices in 2012 remained unchanged compared to 2011 prices.
“That’s one example of how elasticity plays into inflation,” Kuester said. “For goods like pizza, people can find substitutes like other fast food or cooking at home, making the demand elastic. This means that this industry is more sensitive to price changes and is less likely to be affected too drastically by inflation.”
Other industries, he said, such as gasoline or tuition, are often considered to be basic necessities that people will generally pay for regardless of price, making the demand inelastic.
“As students, we have to learn how to budget and make those adjustments,” Lundy said. “Personally, I try to buy generic brands for certain things and pick and choose where I buy nicer items. This helps me put more money into things that I really want.”
In addition to various world events and political developments, Kuester attributed the increases in SPI to Manhattan’s “unique economic environment.”
“When you look at a college town like Manhattan, there’s usually a high influx of people coming into the town on a regular basis,” he said. “Things like game day for football, the beginning of the semester for the university; these are all things that can allow businesses to make a little bit more profit than they would normally make in another setting.”
Gavin Koester, vice president of the Economics Club and junior in economics, said that the causes of inflation can often be linked to legislation and the actions of the government, which often have an indirect effect on the economy.
Waging war and increasing the defense budget, trying to support an expensive medicare and social security system and enacting laws restricting funding for education were some examples of developments that Koester linked to inflation.
“This is just another reason that students should be involved in the legislative process, especially at the local level,” Koester said. “The actions that our government takes can have an indirect effect on things like tuition and overall costs. In the end, we’re the ones that have to shoulder those costs.”
