In theory, as we all know, when the economy turns down, firms can not sell their products, services can not run their system well and it leads to bankruptcy. We always assume that as GDP falls, people tend to save rather than spending, therefore, there is excess of goods which is due to more supply than demand. This situation is theoretically right and it also applies to different industry and businesses.
However, sometimes things do not always follow what they are expected to be. During the recession, there are a number of businesses still running very well; they even gain more profits than before which are due to high demand. It was proved by an article named “Bargain stores boom in downturn” in the “Straight Times, Home” on 19th February. Many bargain shops which sell groceries, plastic household items, and daily foods… such as Sheng Siong, MCP banner’s supermarkets, ABC Bargain Center and Fair Price, have increased a large number of goods to sell and have reaped much higher profits. There are some data that are collected by the newspaper which can prove how successful these businesses are running. MCP’s revenue has increased by 50% form 2007 to 2008; revenue of Sheng Siong has also gone up by 11%. Although ABC Bargain Center has the lowest fluctuation, its output has risen up about 5% recently. As demand from consumer increases, so is the revenue of these bargain shop system. So the question is why demand for these goods increases during the toughest period of the economy. The answer should be that because daily foods, groceries and household items are the necessities for everyday needs so they are considered as inferior goods which are preferred to be consumed at lower income level. In addition, these entrepreneurs decide to cut down all prices, this explains why although the economy has fallen, they may want to consume more, because prices will go up in the future if the economy improves better. Moreover, these businessmen also want to open more branches during this year, so actually, demand for land increases during recession and how it really happens? The only way to understand is value of land has dropped. Since the cost of land has fallen, risk takers prefer to invest immediately rather than waiting for the recession to end, because at that time, prices will increase higher again. In result, many landowners can turn from bad to good situation and gain more profits.
The most important thing to be mentioned here is if we want to push up the economic growth out of the recession, we have to do as much as we can to promote high level of demand again. By cutting their price, bargain shops and landowners are successful in saving their business and also have a contribution to the economy. We can not really judge if the recession has bad effect or may become good opportunities for businesses. Therefore, maybe the key factor to raise consumer’s demand is adjusting the price suitably. It can also answer why there are many entrepreneurs succeed in starting their business in the recession since prices of almost everything go down.
However, sometimes things do not always follow what they are expected to be. During the recession, there are a number of businesses still running very well; they even gain more profits than before which are due to high demand. It was proved by an article named “Bargain stores boom in downturn” in the “Straight Times, Home” on 19th February. Many bargain shops which sell groceries, plastic household items, and daily foods… such as Sheng Siong, MCP banner’s supermarkets, ABC Bargain Center and Fair Price, have increased a large number of goods to sell and have reaped much higher profits. There are some data that are collected by the newspaper which can prove how successful these businesses are running. MCP’s revenue has increased by 50% form 2007 to 2008; revenue of Sheng Siong has also gone up by 11%. Although ABC Bargain Center has the lowest fluctuation, its output has risen up about 5% recently. As demand from consumer increases, so is the revenue of these bargain shop system. So the question is why demand for these goods increases during the toughest period of the economy. The answer should be that because daily foods, groceries and household items are the necessities for everyday needs so they are considered as inferior goods which are preferred to be consumed at lower income level. In addition, these entrepreneurs decide to cut down all prices, this explains why although the economy has fallen, they may want to consume more, because prices will go up in the future if the economy improves better. Moreover, these businessmen also want to open more branches during this year, so actually, demand for land increases during recession and how it really happens? The only way to understand is value of land has dropped. Since the cost of land has fallen, risk takers prefer to invest immediately rather than waiting for the recession to end, because at that time, prices will increase higher again. In result, many landowners can turn from bad to good situation and gain more profits.
The most important thing to be mentioned here is if we want to push up the economic growth out of the recession, we have to do as much as we can to promote high level of demand again. By cutting their price, bargain shops and landowners are successful in saving their business and also have a contribution to the economy. We can not really judge if the recession has bad effect or may become good opportunities for businesses. Therefore, maybe the key factor to raise consumer’s demand is adjusting the price suitably. It can also answer why there are many entrepreneurs succeed in starting their business in the recession since prices of almost everything go down.
Very interesting application in life.U have done the research on those bargain shops very well.However i do not agree with the point that"there is excess of goods which is due to more supply than demand during the economic recession".If the GDP falls,absolutely that those business firms will know about it and i'm sure that they are smart enough to know what to do to deal with the recession.I mean they will decrease their supply immediately,so the scenario that excess of goods will hardly happen.I also see the advertisement on the singtel top up card about the sheng siong shops that you can exchange your top up cards to have cans of pepsi or other things...Lastly,the ideas in your conclusion are really great.
ReplyDeleteYou have brought up several demand concepts as related to the context of iphones. Good application! You can also discuss about the relative shifts in demand. For example, for the 2G phones, it cannot be jail broken outside the US and its substitute was released thus demand is lower. Yet there is still an increase in demand overall – why? This would allow a more evaluative blog posting.
ReplyDelete