CRISIS!!!

In the recent times of the economic crisis, almost everyone has suffered. Form the rich to the poor, from the companies in agriculture to the companies in IT; basically everyone.

Companies such as Lehman brothers were one of the first few companies to go bust due to this crisis. To prevent this from happening again, the government and the companies it self are taking many drastic measures. The government for example has used the buffer stock scheme. But the question at issue today is what the producers did to help themselves to survive this period of time.

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Lets use an example, the clothing giant Hugo Boss. They deal in ultra luxury clothes which range from S$200 to even S$3000. during this period of time, they knew that less people would want to buy from them due to the high prices. To tempt or encourage people to continue buying from they started giving discounts. They used to give discounts only twice a year but its not even been June and they have given discount 3 times already! They even started schemes such as a “Hugo point system” where you can redeem points for clothe items.

Even though producers have tried to help, but it was not enough and thus even consumers had to take measures to help them selves in this period of time.

For example, a normal income house hold will start saving up more. To meet with the rising cost of our daily needs, people have started saving up by cutting down on electricity usage and to stop spending unnecessarily ( stop purchasing veblen goods for example.) They will start purchasing more staple foods (like rice) rather then more exotic types of noodles for an example.

Demand and supply graphs are consistently changing due to the recession. Price is variable to the factors that are consistently changing. For example, rice. When supply is high price will decrease and there will be a surplus. But now they are facing drought in most countries which produce rice, this will cause and decrease in supply (consumption is outstripping production) and thus price will rise and will cause even more trouble for the families who are just making ends meet.

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These are a few of the ways consumers and producers are both helping each other to help us survive this troublesome period of time.