Tips for consumers and producers in recesssion- RiTa 5W

In the market economy, both consumers and producers always find the best ways to gain benefits in purchasing or selling goods to one another. For consumers, they try to save their spending while the producers want to decrease the cost of production to have more profits.

Let’s discuss about the consumer side first. Nowadays, because of technology advance, people begin to buy goods on the internet rather than consuming them directly from the shops. It does not only save time but consume the goods with much lower prices. Buying air ticket online can be an example of this kind of consumption. From Singapore to Hochiminh city, because of the short distance, there are many airlines that offer cheap flights. This is also the time of recession; these companies want to have bigger discount on prices to attract more people buying their tickets. In addition, air tickets are price elastic as they are a considerable portion of people’s income. Therefore, consumers always look for different websites and may check the fees regularly in order to have the best fees. Usually, the sooner the time the air tickets are booked, the cheaper the prices that consumers can get. Prices of air tickets can be in a range between one hundred and five hundreds, they can be even cheaper. So, if I book an air ticket three months before the departing day, the price can be a little bit higher than S$100. However, if I book that ticket only before one week, the price may go up to nearly S$400. It really happens with the companies which always offer cheap air tickets such as Tiger Airways (http://tigerairways.com/), Jetstar (http://www.jetstar.com/sg/en/index.aspx) or Vietnam Airlines. We can see clearly that air ticket is also very elastic in a sense of substitutes and there can be a slight difference in prices. So, in some ways, taste also affects the consumption of a product even it is cheap. However, most of the time, I choose Tiger because it is the cheapest among the three and it also has more promotions and the other two. For instance, once, in a special holiday occurred in September last year, the price goes down to S$0.08, excluding tax. Normally, the cheapest fee may be S$10. Therefore, if the consumers know how to choose a good company to rely on and also mange their time well, purchasing goods online can be a good way to save their money.

Next, we will talk about an efficient way from the producers to reduce cost of production during recession. Most of people tend to think that employing fewer workers is a good solution but it is not always true. In addition, it may create bad effects on the economy since so many people do not have jobs. Firms can not always producing goods by themselevs withot having any other cooperations. Therefore, for me, optimism in production can be a better choice for decreasing cost. Now, I will explain what I mean by that. It means firms can produce the same goods by investing into other countries where cost of production is much lower. There are many large companies producing manufactured goods in more economically developed countries want to invest their capital into other developing countries. The reason is they have to spend much higher cost for employing workers and buying raw materials in their own country. While in developing countries, because of the economy is still poor, everything is much cheaper. Investors can have lower cost for rentals, labours as well as raw materials. Hence, there is a number of foreign companies build factories or cooperate with other companies in less developed countries to manufacture goods. For instance, Toyota Motor Companies has the head company in Japan but they also open their factories in Vietnam. However, they only produce all the spare parts of the cars in Japan first as workers of developing countries do not have enough skill to do that hard jobs. Then, they will transfer all these parts to Vietnam and Vietnamese workers only assemble them together. By this way, Toyota producers can reduce a part from the cost of production. Lets say before, a car may cost about $10.000 to be produced, now, it may decrease to $8.000. Because of a decrease in cost of production, total revenue of the company also goes up. It does not only benefit to the company in Japan but the Vietnamese workers and factories also get advantages.