Looking at the Law of supply and demand.

What had come about two years back

We recently been exposed to the law of supply and demand in Intro to Econ… It’s an interesting subject, indeed. Some people in the class are still confused of how a price could rise and how could a demand fall when the price is high and how could a supply rise when the price

is high. It’s a theory of a human, it is not the ultimate law. It’s a study of how a person look at the tendencies in the society of consumer and producer. but what kind of society does the theorists study when they figure out this theory.

Trying to understand this situation, I look back at how people expect things to happen in this

world. there is something called morally right and logically right. The morally right is triggered whenever you feel something is wrong, logically right is tiggered whenever you know something is not explainable by your thinking patterns.

Calling the relation of supply and demand as a LAW makes it morally right and logically right.

Everything that happens in the mechanism, including the producer’s n consumer’s greediness, is right.

How could a supply fall when the price is low? Producers expect higher

revenue in the future. They prefer to pile stocks and wait till the

price is ‘normal’, only then they distrubute. How come there will be a shortage of good when the government set up a ceiling price? Some producers prefer not to produce the good as it bring less profit to the company.

Why is the demand of goods relatively higher when the price is low? More consumers want to be more satisfied by consuming more goods. How could a demand falls when the price is high. Consumers (unconsciusly) realize that they dont really need the good. How could a scarcity have an effect to a higher price? Producer wants to sustain the amount of revenue from the available resource.

RM100X100units=RM200X50units

People who don’t understand these reasons may be a morally right person because they believe these shouldn’t be the core reasons of how things happen in the mechanism. People who understand these reasons as logically right might get it as normal reasons (without thinking

wheteher it is right or wrong) and will continue to believe so and apply it to their life and descending it to their family and friends. But if these people try to seat back and think back they should have realized that their logic derives from something that is not logic.

Greed is a feeling, yes, it something that all people might feel (which could make it as a logic) but people don’t think to get such feeling. there’s no reason why people greed. I’m not saying that studying this subject is useless. but it would be dangerous if we force to apply this theory to predict what will happen in the future economy. It will only create a speculation, and look at how many people had suffered because people in the economy swayed and believe and act purely based on the speculation created by such theory.

was originally posted on November 25 2005 as an entry on spaciousspace.blogspot.com (my first ever blog)

7.10.07 / 6am