The mystery of the shrinking wallet: How to combat rising prices, part 3

By Randell Tiongson on April 29th, 2011

… conclusion

Let me go back to the economic gibberish once more. Whenever we curb our consumption, assuming that a substantial number of us do, we can actually prevent prices from rising and even cause it to decrease. It’s called the Law of Demand & Supply. Let us be refreshed on what this fundamental economic principle is all about – nosebleed courtesy of Investopedia.

“Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand. “

Simply put – increase in demand will result to a lower supply, therefore prices go up. A decrease in demand will result to an increase in supply which will drive prices down. Juxtapose this with a national consumption level, say on the way we spend on mobile communication. If we curb the way we use our mobile phones, the telecom companies will be alarmed with the reduction of their revenues and will entice subscribers with more promos, discounted rates and the like just so that consumption will revert to more comfortable levels. We can use the same argument for other goods and services like chicken, electricity, water, gasoline, etc. This should work, well at least in theory. History will reveal that some industries have reduced their prices because the demand level dipped and the only way for them to survive is to cut down prices. Many of the things we consume have disproportionately high profit margins such as soap, shampoo, detergent, toothpaste, etc. If we can only educate the consumers on how they can prevent prices from rising by manipulating our consumption, we can actually have healthier bank accounts.

If the others will not see the light and affect an epic change in the national scene, we can still do so on an individual level. All we need is the resolve to be more prudent, stay away from having a consumer lifestyle, care less about what our nosy neighbors think of us, practice delayed gratification and so forth and so on. Prices will always rise whether we like it or not but we will only be victims if we allow it to be so.

Let’s check our lifestyle: “Some who are poor pretend to be rich; Others who are rich pretend to be poor.” – Proverbs 13:7, NLT

Let’s be diligent: “Lazy hands make a man poor, but diligent hands bring wealth. – Proverbs 10:4, NIV

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One thought on “The mystery of the shrinking wallet: How to combat rising prices, part 3”

  • I’m just an average student, well maybe below-A from a local State-u….
    I thought about this when I was in high-school but, my teacher seemed to looked down on my idea and brushed me off to proceed with his lecture.
    To make the story short, I found my idea absurdly idealistic.
    Because if the people stopped buying a product and started looking for an alternative, wouldn’t some business, in time, get liquidated?.. How long will your theory come into effect? a formula can be stated, I think….. setting a variable for the unknown behavior.
    But for this to work without any downside, you’ll have to teach everyone even the businessmen(for them to hedge etc.) about it. It maybe 1 out of a million….. But Plausible..

    I hope this theory becomes fact soon….. so I can go back to my teacher and say “I told you so”

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The mystery of the shrinking wallet: How to combat rising prices, part 3