… 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

Inflation has been rising. Government says it is now beyond 4% and many institutions are saying that we can expect inflation to breach the 5% mark very soon. The government already conceded that it will miss its inflation target — what they are not saying is they are missing the target by a mile.  The other day, I passed by the gas station to get some unleaded fuel and told the gasoline attendant to pump me P 1,000 worth of fuel. For a cheapskate like me, that’s a lot of money to part but we all need to spend, whether we like it or not.  As I was watching the pump, I was surprised to see that my precious 1,000 bucks was only able to buy a little over 17 liters of fuel! The nostalgic in me reminisced about the bygone years where pumping 500 pesos was enough to fill my gas tank – oh the glory days! It’s not just fuel that reduced my purchasing power, the same applies whenever we buy groceries, pay for bills, eat at restaurants and the like.

From my perspective, I don’t think inflation is just at 4 to 5% — and my wallet agrees with me.

Just what is inflation? Investopedia defines inflation as “the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.” In practical terms, it means that prices will rise according to the inflation rate over one year (per annum); if inflation is at 4%, a P100 per kilogram of Chicken today will cost P104 per kilogram next year.  Consumer Price Index or CPI is the barometer to which inflation is measured. In general, the consumer price index reflects changes in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly. The basket includes the most basic goods the average Filipino family consumes – general food items, utilities, oil, etc.

Alright, enough economic gibberish – no one wants to be reminded of the boring economics classes we had to take during our student days. Unfortunately, the ‘boring economics’ we all hate is pretty much the reason why we are all dumbfounded – trying to figure why the value of money in our wallets are shrinking.

Our knee jerk reaction to rising prices is always to be overwhelmed, and for a good reason. I’m not sure if this applies to other folks but here’s how I react whenever inflation is very high: disbelief, anger, frustration, blame, acceptance, indifference. I get shocked that prices goes up so fast so soon (like fuel); then I am annoyed as to why prices are going up such as external factors (middle east situation, financial crisis, etc.); I move on to being frustrated – frustrated at the government for not making the right responses, frustrated at myself for my microscopic income; then I blame the government for being inept and sometimes blame myself for missed business opportunities that would have cushioned the rising prices; I slowly begin accepting the harsh economic realities that life is as such and there’s really nothing I can do about it; finally, I move to being indifferent – after all, my ramblings will not bring prices down and I resign to the fact that there’s nothing I can do.

… to be continued.