Inflation.

A better life is a dream for any human that he or she wants to live. The fulfillment of dream many times depends on earnings they make. As an Android software which controls the entire smartphone hardware. Similarly the economy (money) is the software which controls the life of the people. If we open multiple apps on your smartphone your Android software performance decreases and get stuck sometimes. In the same way if people consumption of goods increases in the nation then there will be raise in scarcity and demand. In order to meet the performance we have to upgrade to high cost processors and ram based phones(here cost increases).

Something similar happens here to the manufacturer (producer) for this he increases the price of the goods to control the supply to meet the demand. In this situation of increase in price of goods where general public stops spending much. If the demand continues and supply doesnt meet to it , then nation starts importing goods with high prices. At this point of time we can see hike in prices of goods.This state is known as Inflation or Inflated economy.

There is a clay potter in a village

Lets go into tale now. There is a Potter in a village. Where he used to make good quality of pots for cooking in the village. In few years of time Steel moulding machines were brought into a village by one of his competitor. He started making Steel vessels for cooking at less price. The change in trend brought huge sales and demand for him . He hiked prices to meet the demand (of course he wants to make more money). The village saw the inflation where they unable to spend for the steel vessels and meet the trend.So, he started importing Steel vessel goods from other villages to meet his supply requirement.

On the other side the clay pots sales dropped and started seeing less demand. As time passed, there came a situation where a doctor cum practitioner came to the village and setup a health checkup camp. She suggested people to use clay pots for the better health. The entire village now queued towards clay potter. This rose huge demand for clay pots.

Clay Potter who is making pots for cooking
Clay Potter who is making pots for cooking

To control and meet the demand he also hiked the price of the clay pots (of course he also wants to make some money). He sees the raising demand and he couldn’t have sufficient supplies. Again the people in the village saw the inflation and unable to purchase clay pots. The potter don’t want to pass this demand to neighboring village by purchasing the goods from them. He made a plan.He brought more clay from the pond nearby by his village and used his family members to make more pots (as he also doesn’t want rice price further). Seeing this other families in the village also started making more pots. After few months of time the situation was into control. The people could get pots for nominal price.

Demand & Supply
Demand & Supply

Situation Analysis and solution for Inflation in the village

Now let’s analyse the story. We have seen the demand from the people which hiked the price of goods from both the competitors. Even one competitor imported goods to meet the demand, he has passed away some money to other village. But the clay Potter started producing more goods to meet the demand. This controlled prices of pots and inflation in the village. From this we can come to a point where we have to think about production and Manufacturing (Entrepreneurship) of our own products. The indigenous production could meet the demand of the people with normal price, increase imports and raising of currency value. Therefore we can come to a conclusion that the inflation (economic crisis) can be controlled by Entrepreneurship.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *