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    SUBSIDY..??? SIMPLE STORY TO LEARN ABOUT SUBSIDY..

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    warna_hot
    Laftenen
    Laftenen

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    SUBSIDY..??? SIMPLE STORY TO LEARN ABOUT SUBSIDY..

    Post by warna_hot on Fri Jul 18, 2008 11:07 am

    A man called Maha owns a farm which can produce 10 apples every day.
    He has 5 workers to operate the farm.
    Each of them eat 1 apple daily and it is enough to keep them operating the farm normally.

    The remaining 4 apples, the landlord sells them at RM10 each and he earns RM40.

    He uses the RM25 to improve the farm operation and facilities.

    He gives RM2.00 to each of his workers and he keeps the remaining RM5.00 as profit.

    Day by day, the farm is well developed and all of the 5 workers are happy with the money they can save.

    When Maha passed away and there is a new landlord, Abdul comes to continue the farm operation.

    He says to the workers:" We need to improve the farm quality and redefine our way of thinking.

    From now on all of you only need to pay RM1.00 for each apple you eat.
    It is very cheap as the price is RM10 each outside the farm."

    The workers have no choice but to pay RM1.00 for the apple they eat daily. Their earning decrease from RM2.00 to RM1.00 per person.

    As usual, Abdul sells the 4 apples and he gets RM40. He uses RM25 for farm improvement and pays RM10 to his 5 workers. He gets RM5.00 as
    profit. On top of that, he gets another RM5.00 from the apples that he sells to his workers.
    In total, he gets RM10 as profit every day.

    Soon, the apple price increases to RM20 each. The new landlord gets a higher profit as he gets RM80 for the 4 apples he sells daily.

    Then, he decides to give the farming improvement contract to one of his close friend, Samy.

    Samy says:"Apple cost naik, improvement cost also misti naik."


    So, the farm improvement cost increases from RM25 to RM50. In actual fact, the improvement only cost RM30. The remaining RM20, Abdul and
    Samy share evenly among themselves.

    Let's calculate how much Abdul gets daily:

    RM10 (from farm improvement cost)
    RM20 (Net profit by selling 4 apples: [Gross profit, RM80] - [Improvement cost, RM50] - [Wages RM10] = RM20)
    RM5 (from selling apples to his workers)

    In total, Abdul gets RM35 daily compare to RM10 initially when he takes over the farm from Maha.

    His profit increases RM25 and the workers are still getting RM1.00 daily per person..

    The greedy Abdul does not want to stop there.

    One day, he says to his fellow workers:" You see ah, the current market price for one apple is RM20 and you are only paying RM1.

    See how lucky you are! I have to SUBSIDY RM19.00 for each of the apple you buy and total I need to SUBSIDY RM95.00.

    This will greatly burden the farm and we might get bankrupt if we continue like this.

    In order to avoid bankruptcy</FONT></FONT>, I need to increase the apple price that you buy from RM1.00 to RM1.50 and I will bear the remaining RM18.50 per
    apple as my subsidy to you all. "

    So, greedy Abdul adds RM2.50 to his current profit and the number becomes RM37.50.

    After you have read the story, I am sure you have already understood the meaning of "SUBSIDY".

    The RM95 subsidy never existed in the first place.

    So Bro n Sis pls give me ur feedback..

    warna_hot
    Laftenen
    Laftenen

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    UNDERSTAND THE ECONOMICS..

    Post by warna_hot on Fri Jul 18, 2008 11:37 am

    Give it a thought.....something to share

    A man eats two eggs each morning for breakfast. When he goes to the grocery store he pays 60 cents a dozen. Since a dozen eggs won't last a week he normally buys two dozens at a time. One day while buying eggs he notices that the price
    has risen to 72 cents. The next time he buys groceries, eggs are 76 cents a dozen.

    When asked to explain the price of eggs the store owner says, "The price has gone up and I have to raise my price accordingly". These store buys 100 dozen eggs a day. He checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy from the huge egg farms. The small egg farms have been driven out of business. The huge egg farms sell 100,000 dozen eggs a day to distributors. With no competition, they can set
    the price as they see fit. The distributors then have to raise their prices to t he grocery stores. And on and on and on.

    As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there. He checked out the huge egg farms and found they were selling 100,000 dozen eggs to the distributors daily. Nothing had changed but the price of eggs.

    Then week before Thanksgiving the price of eggs shot up to $1.00 a dozen. Again he asked the grocery owner why and
    was told, "Cakes and baking for the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen.

    This pattern continues until the price of eggs is 2.00 a dozen. The man says, "There must be something we can do about the price of eggs". He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs.

    Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.

    The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn't need any eggs. Maybe wouldn't need any all week.

    The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs
    would not need any for at least two weeks.

    At the egg farm, the chickens just kept on laying eggs. To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price.

    The distributor said, " I don't have the room for the %$&^*&% eggs even if they were free". T he distributor told
    the grocery store owner that he would lower the price of the eggs if the store would start buying again.

    The grocery store owner said, "I don't have room for more eggs. The customers are only buying 2 or 3 eggs at a time. Now if you were to drop the price of eggs back down to the original price, the customers would start buying by the dozen again".

    The distributors sent that proposal to the huge egg farmers but the egg farmers liked the price they were getting for their eggs but, those chickens just kept on laying. Fin ally, the egg farmers lowered the price of their eggs. But only a few cents.

    The customers still bought 2 or 3 eggs at a time. They said, "when the price of eggs gets down to where it was before, we will start buying by the dozen."

    Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers.

    The egg farmers cut their prices because the distributors wouldn't buy at a higher price than they were selling eggs for. Anyway, they had full warehouses and wouldn't need eggs for quite a while.

    And those chickens kept on laying.

    Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn't sell. The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price.

    And the customers starting buying by the dozen again.

    Now, transpose this analogy to the gasoline industry.

    What if everyone only bought $10.00 worth of gas each time they pulled to the pump? The dealer's tanks would stay semi
    full all the time. The dealers wouldn't have room for the gas coming from the huge tank farms. The tank farms wouldn't have room for the gas coming from the refining plants. And the refining plants wouldn't have room for the oil being off
    loaded from the huge tankers coming from the oil fiends.

    Just $10.00 each time you buy gas. Don't fill it up. You may have to stop for gas twice a week but, the price should come
    down.

    Think about it.

    As an added note...When I buy $10.00 worth of gas that leaves my tank a little under quarter full. The way prices are jumping around, you can buy gas for $2.65 a gallon and then the next morning it can be $2.15. If you have your tank full of
    $2.65 gas you don't have room for the $2.15 gas. You might not understand the economics of only buying two eggs at a time but, you can't buy cheaper gas if your tank is full of the high priced stuff.

    Also, don't buy anything else at the gas station; don't give them any more of your hard earned money than what you spend on gas, until the prices come down..."

    just think of this concept for a while.

      Current date/time is Sun Dec 04, 2016 11:52 am