The law of supply and demand which is a part of any economics basic course suggest that if a demand is in excess and the supply does not fulfill the demand then there is a imbalance which the free markets will try and come up to the state of equilibrium and the invisible hand will try to make it better.
The issue I am grappling with at this juncture is that of a ordinary middle class American who is out of job and to top it off has his house under water . These are the only 2 foremost things they are struggling with on a day to day basis and nothing else because those were two of the major things an middle class American or for that matter any one is concerned about. These are the major things which bother us on an existential level . let me state theoretically that someone is out of job and he is searching for one , he goes out daily and searches for one but when at the end of day he does not get a chance to prove himself again in job market he comes back to his home and family which he is built over years and finds out his home is under water and is about to be foreclosed , just imagine for a couple of minutes what this person feels. We have all the major news channels pondering over the intricacies of numbers and how to make it right but do we know what goes on in that mind of the one who is trying hard and does not get the second chance .
On the other hand lets hypothesize a situation with a person whose house is under water but is still holding a reasonable job and gets food on the table , do you think how much of his waking hours he is devoting to the fact that his house is under water but has that confidence that he will be able to pull off this bad time with the feeling that he is wanted in the market and the skills he have will get him through this bad time sand some where he sees the light at the end of the tunnel.
All I am suggesting is that we will have to address one of the two imminent concerns , getting an employment to pay my bills and put food on the table or with my existing occupation making me feel cheerful about my life savings which has transcended in this small dwelling which we call home
Now thinking about these 2 different conditions and how to mend them is the colossal debate which is going on in this nation in recent times and has become a sadly fashionable small talk in every social gathering where everyone has his or her 2 cents to suggest.
My theory and the premise which I am suggesting can be construed as trite and commonplace but the idea to pen down my thoughts came from the urge of a common man who desires to propose something which will throw a new light on the complex economic issues which are conferred endlessly and still remain vague and intricate for a ordinary mortals like us.
And some still wonder what the silent revolutions going on around us is all about …
Wednesday, December 21, 2011
Spending ,Spending ...
Looking at the numbers from current economic trends we see total GDP (as of last quarter i.e. June 11) in tune of 15 trillion USD and it can be broadly stated to be calculated from the following components
• • Personal Consumption expenditure (10.6 trillion)
• • Gross Private domestic investments(1.8 trillion)
• • Net exports of goods and services (-606 billion)
• • Government consumption expenditures and gross investment(3 trillion)
Now if we say there is a 5 % increase in GDP I assume it is ( 5% of 15 trillion) around 750 billion and will have to be reflected in one of the major components mentioned above .Logically thinking the easy way of achieving this number is to go after Personal consumption expenditure(approx 7.5 % increase) than the Gross private domestic (approx 42% increase). And hence sending money to the main street via all possible schemes (tax rebates , cash for clunkers, first time home buyers credit etc)
My question would be where are we going to see the 5% increase ? Has to be Spending , Spending ..
• • Personal Consumption expenditure (10.6 trillion)
• • Gross Private domestic investments(1.8 trillion)
• • Net exports of goods and services (-606 billion)
• • Government consumption expenditures and gross investment(3 trillion)
Now if we say there is a 5 % increase in GDP I assume it is ( 5% of 15 trillion) around 750 billion and will have to be reflected in one of the major components mentioned above .Logically thinking the easy way of achieving this number is to go after Personal consumption expenditure(approx 7.5 % increase) than the Gross private domestic (approx 42% increase). And hence sending money to the main street via all possible schemes (tax rebates , cash for clunkers, first time home buyers credit etc)
My question would be where are we going to see the 5% increase ? Has to be Spending , Spending ..
Thursday, December 1, 2011
Touchpad Firesale
From economics 101 we know initial price can be calculated by adding the cost price plus a mark up that would attract a consumer to buy the product. There can be several factors affecting this equation like break even time, branding of product, competition , value add of product .
A study of consumer behavior would give me a lot of information to price the product because at the end of day that will be a major driver in pricing.
A recent case to study on these lines would be of HP touchpad ,the new tablet was sold at 499$ and with a decision to move away from PC business and stopping support on WebOS , HP started selling the same model for 99$.There were lines of folks outside bestbuy and other retailers and it sold out in one day. HP must have done a good initial pricing due diligence effort to begin with but one still wonders what was the real reason ?
A study of consumer behavior would give me a lot of information to price the product because at the end of day that will be a major driver in pricing.
A recent case to study on these lines would be of HP touchpad ,the new tablet was sold at 499$ and with a decision to move away from PC business and stopping support on WebOS , HP started selling the same model for 99$.There were lines of folks outside bestbuy and other retailers and it sold out in one day. HP must have done a good initial pricing due diligence effort to begin with but one still wonders what was the real reason ?
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