Dr. Moyi Harry Ruben
The story of Angel Gabriel, Gabriel heard the argument of the masses about prices and their harm to them, so he decided to try to help in solving the problem by doubling the income of everybody to make ends meet and to make everybody happy.
To be fair, he also doubled the price of everything. (Hence zero happiness.) Who is to blame for the rise in prices? For common men, the traders; for economists, the free market What are the main assumptions about the free market? The researchers have proved that there is no absolute free market in the world; there should at least be an element of control.
This article looks at some of the influences of the gentleman called Price and their impact on the economy of any country. Price acts as a signal for shortages and surpluses in the market and helps firms and consumers respond to changing market conditions.
If a good is in shortage, the price will tend to rise (other conditions remain unchanged); rising prices discourage demand for that good or product, which in turn encourages companies or businesses to increase supply.
A negative result may occur here; if, therefore, a good is in surplus, the price will tend to fall under the competitive market. This is what we presume to call a free market economy. Things may be different in the production economy than in the service economy.
However, the function of the price mechanism is more complex than we think.
- Prices act as a signal for shortages and surpluses, which help businesses and consumers respond to changing market conditions.
- If goods are in short supply, prices will tend to rise. Rising prices discourage demand for goods and encourage businesses to try to increase supply, which may cause a fall in prices (other things remain unchanged). If, on the other hand, goods are in surplus in the market, prices will tend to fall.
Falling prices encourage people to buy more of the product, which in turn causes businesses to try to cut back production or hold goods or supplies to raise prices. The effect here is a real distortion of the economy. Although prices help to distribute resources, from goods with little demand to goods and services of high demand that people value as necessities, prices can throw out businesses as well if allowed to operate freely, as in the case of South Sudan, where we are not in a free market but in a cartel market, where traders in the market do not compete but cartelize the prices.
In a free market, the price of one good in one shop is not the same due to the competitive characteristics of the market, whereas in South Sudan, prices tend to be the same in almost all shops; therefore, this is not the characteristic of a free market but of an oligopoly market. Adam Smith talked of the invisible hand of the market; this invisible hand relies on the fluctuation of prices to shift resources to where they are needed.
Price fluctuations in the market are the most distorting elements of the economy because they influence the market. Rising prices, effect on the economy is that rising prices distort public service and increase poverty and lawlessness in the country if allowed to go unchecked. Mostly, the effect of this on the economy will depend on the rise and fall in supply and demand.
Fall in supply: as the supply of oil, for example, “falls”, the price of oil tends to rise. In the short term, this causes queuing in petrol stations; the demand is inelastic, so there is only a small fall in demand.
Impact of price in the long term: On the other hand, markets do not stay static; if prices rise, the profitability of producing, for example, oil increases. Firms, or companies, could now make supernormal profits due to the fact that marginal revenues are greater than marginal costs. Therefore, higher prices act as an incentive for firms to increase supply. For example, at a low price, it would not be worth drilling for oil in the country, but at a higher price, it is an incentive to do so.
Therefore, in the long term, the higher prices attract more investors to the market and more employment in the economy, which creates yet another increase in supply and fall in prices, and vice versa.
In South Sudan, prices are tied to the dollar rate as if we were in America; therefore, we are not in a free market economy. However, higher prices of oil, for example, have their share of blame for the effect on consumer behaviors in the long term; consumers may look for fuel-efficient engines, as people are to buy fuel efficiency.
Hence, over time, demand for fuel, for example, will fall, and people may start cycling or getting on public transport rather than driving their own cars. Responding to this changing consumer preference, businesses have incentives to develop cars that do not run on gasoline and, for example, hydrogen-powered engines. Enabling more alternative fuels leads to less demand for fuel or any other goods in the long term.
To me, what drives our economy is the foreign currency management mechanism that does not address the prices in the market. The financial economy states that a country is respected if its currency is strong and loved by its citizens as a pride of the country, so we need to give our currency to own the country, not any other currency or non-national to tell us which currency to use other than the national currency. the South Sudanese pound, the pride of the country.
Currently, the world has moved to service. The production economy has been directed at a few citizens who are leaders in it. For example, in the USA, Israel, and Ukraine, these countries lead in the production economy, that is, agriculture, but not all the people are told to go cultivate the land, and few farmers take care of feeding the world. Don’t you think we could do the same to move out of a consumption economy? When the ecology changes, humans must also think about adjusting to the change. When the climate is angry, then we need to mitigate the anger by providing irrigation, which needs to be provided by able government or business anglers in the country, and we do not have shortages of it.
When you talk of employment (jobs), these are not aids to be provided but a reaction to the conditional environment and changes in preference and taste. You must love the job to prove its efficiency and effectiveness. You don’t tell a technical engineer to go to Torit to till the land just because you think he can add value to the economy; we have missed the point.
To move out of this, we need to revisit the national economies, starting from the local economy to the hyper-economy, which to me seemed to be financial economics, which is the study of how the financial system affects the national economy.
That is, financial institutions, financial markets, and financial instruments where microeconomics is how individuals and families make decisions about how to spend and save their income and expenses, macroeconomics is the aggregate demand, how GDP and employment (JOBS) are created and affected by financial economics.
Further, how exports and imports are distorted by financial economics and how exchange rates are affected by financial economics Remember, the Devil’s money can be cheaply created by paying USD 1 million to the printing press abroad to print the papers (I promise to pay you on demand) of SSP 20,000 trillion just from thin air.
So such a mechanism is what any able man could review in its operations, and it is the only way that it can mitigate the economy of any country. When you control financial economics, you can now talk of improving the economy, creating jobs, and busting your so-called GDP, or per capita income. Otherwise, any effort is a toilet flash.
Dr. Moyi Harry Ruben, Ph.D. Corporate Finance, is an Associate Professor of Financial Economics. He can be reached via 0922442554 /whatAsap 211923875000