Consumers:
Each and every one of us are consumers as we buy goods for our own satisfaction and use. Consumers should make a list on what they want to buy is a need or what they want to sell is a want. From here, they should prioritise what should be purchased and what should not be purchased in the short term. Should they wish to buy luxury goods or goods/services that they want, they should keep a budget and limit the quantity purchased in order to reduce their costs or buy it only during sale time. They should look for cheaper substitutes if possible if they wish to buy luxury goods. Instead of buying a Crumpler bag, the consumer can choose to buy a cheaper substitute and this will reduce the costs of the consumer during the recession where he/she can save the money for other things. The consumer can also make limits on how much they spend on food, transport, entertainment, shopping etc. This way, they will learn how to budget well and not to overspend where they are actually able to save more.
Producers:
A producer is an indiviudal/firm that produce goods and services for consumers to consume. Other than the idea of laying off workers as they are a burden and do not have much impact on productivity due to the law of diminishing returns even if it is a big multinational corporation, there are other ways to reduce the firm's costs. Instead of laying off workers, firms can reduce their labour costs by giving their staff pay cuts, shorten their work week or take more days of no pay leave. Singapore Airlines (SIA) used the latter two to reduce their costs while not laying off their staff for all divisions while some pilots and cabin crew were asked to go on 2 year no pay leave since this will reduce their labour costs as their output is low. This will reduce their labour costs in the short-run and was done to match their production level which has decreased. These measures are done as the demand for air travel has decreased since people only travel when necessary where the airline itself has reduced its output. They will then reduce the units of factors of production i.e. input as a result. These measures reduces the costs of production to the firm in the short run during the recession while not increasing unemployment as a whole.
Terence Ong
5x
Certainly people need to budget more during the recession and be more cost conscious. It was good that you brought up the idea of SIA allowing staff to go on a leave for up to two years - the problem is this - what if the staff are afraid that when they come back in 2 years, tney are no longer needed?
ReplyDelete