Economic Insights

            ‘Tis the season of sales, a joyous time when a wide variety of items may be purchased for a fraction of their cost. Of course, most people are too delighted by the sales to stop and think about what the sales actually mean.

            When purchasing that wonderful item with the 50% off tag, it’s hard to think about anything other than how lucky you are. However, if you pause to consider the implications of that discount, you may come to realise that the store you are buying from is still making a profit. Not as much profit as before, but a profit, none the less.

            The fact is that most products in stores have at least a 100% markup from the wholesale price. This means that if you’re buying something for $100, the store paid $50 for it. This might seem unreasonable and horribly unfair, but it’s a necessity for the economy. When you purchase from a store, you aren’t only paying for the item – you’re paying for the space it has in the store, its availability in the store, the other items in the store that never sell, heating and power for the store, employee wages, and, of course, C.E.O. and investor income. That’s on top of the shipping and manufacturing costs.

            However, taking that all into account, sales still happen – and turn a profit. How? Increased sales. If a store buys ten of something and only sells half, at a 100% markup they are only breaking even. On the other hand, if they throw it on sale, people come in droves and all ten sell – perhaps they sell for less, but they sell for enough to turn a profit.

            Yet, what we see are the sales – a chance to save a few dollars. But, we aren’t really saving money, are we? We’re just paying less than we’re used to, when we’re paying for the excessive number of items produced. If we really wanted to save money, we’d refine the system to produce what is needed. We’d cut down on waste, excessive profits, and everyone would save money (making the people earning the excessive profits less desperate to have so much money).

            What I think would help the most, though, is if everything we purchased had a breakdown of where the money is going – like the nutritional information on food. That way we’d see where our money was really going. I bet that would really quickly change what people (who can be bothered) are willing to spend money on.

Click here to find the charity anthology containing a couple of my short stories.

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If there's any subject you'd like to see me ramble on about, feel free to leave a comment asking me to do so.

Supply and Demand

            Today’s blog starts, as many of them do, with me thinking about things. In this case, supply and demand; how it’s supposed to work compared to how it has come to work.

            First, how it’s supposed to work. It’s all in the name: supply and demand. Supply is how much of something is available and demand is how many people want said something. Say, for example, a farmer in a market has ten apples to sell. If there are only five people who want apples, the farmer lowers the price to make the apples more desirable to purchase. On the other hand, if there are fifteen people who want apples, the farmer raises the price – this way, the people who don’t want the apples very much are dissuaded, the people who still want apples get them, and thee farmer makes more money for his work.

            It is a good system and makes a lot of sense. Sure, the farmer loses out a bit when lowering the price on the apples, but none of the apples go to waste and he’ll probably make a little more money by selling all the apples at a lower price than he would selling a few at a higher one. And while the people who found the higher price on the apples disappointing, it will still have been their choice not to buy one, whereas if the farmer had run out they would be likely to be more upset.

            Since the industrial age, though, this had been skewed. Just about anything can be mass-produced these days, and for a fraction of the cost. Theoretically, that means everything should be cheaper, yet the opposite is true.

            If something looks to be popular, it gets mass-produced. Far more of the item gets manufactured than could possibly be needed, just to make sure more than enough is available wherever it could be wanted. Then all the items are priced to cover the additional cost, along with a healthy profit margin, because if people want something enough, they will pay for it.

            The result is that there are many being sold for several times what they are really worth and there are still a lot left behind as waste.

            So, instead of market prices being controlled by supply and demand, they are now controlled by people seeing how much they can get and generating tons of waste.

            It seems to me that by doing better market research (and with less greed), a lot more could be provided to more people for lower costs, for everything from food to entertainment systems to vehicles.

            We have all the resources and skills to make the whole world run smoothly. Why haven’t we done it?

Click here to find the charity anthology containing a couple of my short stories.

If there's any subject you'd like to see me ramble on about, feel free to leave a comment asking me to do so.