Economics

Economics — No Comments
19
Dec 11

Advantages and Disadvantages of Socialism

Socialism as the name suggests is something which is for the benefit of all the people rather than small group of individuals. Under socialism economic system it is the government which possess majority of the factors of production and rest lies with private sector or capitalist as we call it, given below are some of the advantages and disadvantages of socialism –

Advantages of Socialism

  1. Under socialism since it is the government which owns majority of factors of production the chances of consumer being charged more is reduced as government will add minimum margin of profit on the produce unlike private companies.
  2. Chances of monopoly by few producers or people is next to nil under this system as government holds majority of resources, people are not in position to take control of resources and created monopoly like situation.
  3. The gap between poor and rich is there but it is not that gigantic as in the case of capitalist economic system.

Disadvantages of Socialism

  1. Imagine if in the race if there is no competition than you would not run with full speed but rather slowly in the same way under socialism economic system there is lack of competition which hampers the growth of the country.
  2. There is no incentive for people to develop entrepreneurship skill as they know it’s of no use, and we all know that entrepreneurs are essential if country wants to grow and compete with other countries of the world.
  3. It also suffers from delay in decision making on the part of government and bureaucratic attitude of government employees.
Economics — 2 Comments
16
Dec 11

Rupee Depreciation Effect

Rupee has been deprecating against the dollar for the past 4 months and many analysts are predicting it that it will depreciate further. Rupee depreciation means that India’s currency has lost its value in comparison to US dollar, now the question is what will be the impact of rupee deprecation, well at this point it is difficult to quantify it but given below are some of the possible effects of rupee deprecation –

  1. Inflation which has been haunting Indians for past 2 years will rise as India is a net importer, and crude being primary import, the cost of importing crude will rise even if the price of crude falls in international markets. Hence inflation will be the key risk due to deprecation of rupee.
  2. Indian corporate sector which import raw materials from abroad will also be hit hard as they have to pay more for imports and therefore their profit margin will be hit hard.
  3. Small importers will also be in pain as they too have to pay more for dollar, which in turn would make some smaller importers to go out of business or may even lead to bankruptcy.
  4. Exporters like IT companies will be benefited because of rupee deprecation as they will receive more rupees per dollar which improve their bottom line and hence more profits for them.
  5. Other people like non resident Indians who remit dollars to India will also benefit out of this, and also foreigners coming to India will find it cheap to come to India which will in turn benefit the hospitality sector.
  6. Students going abroad for further studies and Indians going to foreign travel will be pinched hard due to his movement in rupee.

Rupee deprecation has more disadvantages than advantages and if this fall is not controlled in time than it can have serious effects on the Indian growth story and also it can lead to downgrading of Indian economy by rating agencies all over the world.

 

Economics — No Comments
7
Dec 11

Type of Goods

In economics goods are those which satisfy the needs and wants of consumer, goods can be anything ranging from small pin to big aircraft, and that is the reason why it is important to classify goods. Given below are the various types of goods which are there –

  1. Luxury Good – They are hose goods where an increase in income leads to bigger increase in demand for such goods. So for example if your income rises from $100000 o $150000 than chances are that you would end up spending majority of that $50000 increase in your income towards consumption of luxury goods like LCD television, iPods, mobiles etc…
  2. Free Goods – These goods are those which are freely available like air, water (Though water cannot be said to be completely free).
  3. Public goods – They are those goods which are used by all such as parks, roads and so on, public goods are often provided by the government to its people.
  4. Private goods – They are opposite of public goods which means they cannot be used by all and one has o pay for it in order to consume private goods.
  5. Substitute goods – They are those goods which can be used in place of other goods by the consumer.
  6. Complementary goods – They are those goods which are used together and therefore the demand for such goods is interdependent. For detail explanation on substitute and complementary goods one can see the following article.
  7. Normal Goods – They are those goods whose demand increases when the income of the consumer increases and vice versa.
  8. Inferior Goods – They are those goods whose demand increases when the income of the consumer decreases. For detail explanation on normal and inferior goods one can see the following article.
Economics — No Comments
26
Oct 11

Hyperinflation Next Financial Crisis

Hyperinflation is a term which creates havoc among the minds of economist and governments across the world and if you ask person who know little about economics, they will tell you that hyperinflation is the worst thing to happen any country or economy. Hyperinflation is like spoilt child the more you try to control him or her the more they get out of your hands.

Before discussing about hyperinflation one should know what is hyperinflation, well hyperinflation is a condition under which the prices rise really fast and government and the central banks are unable to control those prices. Under hyperinflation the prices can rise 5 to 10 percent even on daily basis and that is the reason why governments just cannot afford to have inflation for too long because high in inflation for extend period can result in hyperinflation.

Under it the value of money falls so fast that all your fixed deposits or cash in your hand will be nothing because in hyperinflation the good which is available now at $ 1 will become $10 or even $100. For example in Zimbabwe which is facing hyperinflation the government had to print $100 million currency note and even then they were unable to control the hyperinflation. On a lighter side during hyperinflation you do not need to have money but bullets because no matter how much money you have it won’t be enough.

The way commodity and food prices are rising across the world I won’t be surprised if in future many developing and developed countries would be facing this monster called hyperinflation and if proper steps are not taken than it will be one of the biggest crisis for the world, even bigger than 2008 financial crisis.

Economics — No Comments
23
Oct 11

Non Tariff Barriers

In economics and international trade in order to curb imports from other countries many governments imposes barriers. There are two types of barriers one is called tariff barrier, which involve imposing taxes on imported goods so as to make them expensive as compared to domestic goods. This is the prime weapon which is used by all governments across the world in order to curb the import of goods they want to curb.

The other barrier is called Non tariff barriers, it does not imposes direct taxes but these barriers try to reduce imports indirectly by using many measures, non tariff barriers can be put in many ways like restriction in terms of quantity which can be imported, strict quality norms, putting many conditions which are impossible to meet, obscure licensing requirement, import quota and so on.

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