ECONOMICS MATTER: WANTS VS NEEDS: Knowing the difference between these two concepts will help your finances and know exactly how you spend your money by asking yourse...
Wednesday, 26 July 2017
WANTS VS NEEDS
Knowing
the difference between these two concepts will help your finances and know
exactly how you spend your money by asking yourself whenever you want to buy something
“is this really my WANTS or NEEDS”
NEED is a “must to”, it is something you have to have.
Basically there are four basic needs for survival which are good food, clothing,
shelter, basic health. Food is a must for survival, you might not need a lot of
food but you must eat something, wear something, and be sheltered somewhere.
NEEDS ARE NECESSITY.
WANT otherwise is something you would like to have, not that
without them you are nothing, but something it will be a good thing to have,
extra of whatever you have before is your
want, they are not absolutely necessary for you to have. Example: some
people refer music as a need, because they believe they can’t do without it,
yes that may be true but you don’t need music to survive. Try 3 days without
music and 3 days without food.
NOW, confusion may arise because I generalized the word “food”→any
substance… but, note some food can be a WANT also. You need all these classes of
food e.g. protein, carbohydrate, vitamin etc. for growth and healthy body. Ice
cream, yogurt, meat pie etc. are your wants, they may do your body good, but
you don’t need them for survival therefore they are wants.
IN CONCLUSION
NEEDS: something
you have to have
WANTS: something
you would like to have
In actuality you just need four things
- · A roof over your head
- · Enough food and water
- · Basic health care
- · Clothing
Everything apart from those things listed above are your
wants- a big house, Gucci cloth, fancy food, a new car, latest phones etc.
Advice, life is meant to be lived, not survived. Treat yourself to some wants along the way, but do so when you can best afford to, and enjoy those wants as the extras that they are. Be careful when satisfying your wants.
Saturday, 22 July 2017
devaluation vs depreciation
DEVALUATION VS
CURRENCY DEPRECIATION
Students often misinterpreted these two exchange rate policy
together, although they seems to do the same thing, as they both deals with
value of a particular currency in the international market. In real sense, the
value of currency dropped relating to other currencies in the world market. To
this extent they are the same.
For simplicity it is necessary to understand Exchange rate
and its types.
Exchange rate can be define as rate at which one currency exchanges for another, it has
to do with the rate at which a particular currency let say Nigeria (#) relate
to other foreign currency let say ($), the changes in exchange rate is either
an increase or a decrease, which directly affect the country’s (import and
export) .
Types of exchange rate
Ø
Fixed exchange rate
Ø
Floating exchange rate
A fixed exchange rate is a type of exchange rate regime
where a country currency’s value is fixed
against other currency/currencies. Here, a country’s central bank uses an open market merchant to buy and sell
its currency at a fixed rate.
A Floating exchange
rate is a type of exchange rate regime where the value of a country’s
currency is allowed to fluctuate in response to foreign exchange market mechanism. Currency that uses a floating
exchange rate is called floating
currency.
NOW
DEPRECIATION OF CURRENCY: depreciation of currency happens
to that currency that operates with a
floating exchange rate and it is likely to change on daily basis. Here the
forces of demand and supply in the international market determine the value at
which a country’s currency exchanges for other currencies. DEPRECIATION occurs when the forces of demand and supply cause the
value of the currency to DROP.
DEVALUATION OF CURRENCY: devaluation deals with country that
uses a fixed exchange rate to value
its currency. In a fixed exchange rate economy it is the work of the government
to decide the worth of its currency
compared with other countries, here the government buy and sell its currency to
keep its exchange rate the same. The exchange rate can only be influenced by
the government. If a government decides to make its currency less valuable, it is called devaluation.
What is the effect of
depreciation/devaluation of currency on the economy of a country?
Generally
both have similar impact on on the economy in the
short run. Both depreciation/devaluation tends to help exporting companies,
as a decrease in the value of home currency, it allows the other countries to
import goods at a cheaper price from the country whose value of currency has
depreciated/devalued, thus export from home country will increase. More so
citizens will find imported good more costly, as it cost more of local currency
to import from other countries. This is good to help infant industries to grow
and, also as a means of correcting balance of payment deficit. By implication
depreciation/devaluation tends to increase export and reduce import.
Depreciation in the
long run is a slow process, and the value of the currency gets adjusted
automatically by the forces of demand and supply. Thus, when the currency of a
country had been depreciated, the investors from other countries will see an
opportunity and are likely to shift from other economies. This will help in boosting
the economy which in the long run will appreciate the currency.
Devaluation on
the other hand, there is less trust in the economy and once currency is
devalued, government finds it very difficult to revalue the same by government
dictate as there will be fear that such revaluation can backfire and put the
economy is risk.
Comment below if this is helpful…stay tune for APPRECIATION
OF EXCHANGE RATE
Thursday, 6 July 2017
Microeconomics and Macroeconomics
By the end of this section, you will be able to:
• Describe microeconomics
• Describe macroeconomics
• Contrast monetary policy and fiscal policy
Economics is concerned with the well-being of all people,including those with jobs and those without jobs,as well as those with high incomes and those with low incomes. Economics acknowledges that production of useful goods and services can create problems of environmental pollution. It explores the question of how investing in education helps to develop workers’ skills. It probes questions like how to tell when big businesses or big labor unions are operating in a way that benefits society as a whole and when they are operating in a way that benefits their owners or members at the expense of others. It looks at how government spending, taxes, and regulations affect decisions about production and consumption.
It should be clear by now that economics covers a lot of ground. That ground can be divided into two parts:
- Microeconomics focuses on the actions of individual agents within the economy,like households,workers,and businesses;
- Macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports. Microeconomics and macroeconomics are not separate subjects, but rather complementary perspectives on the overall subject of the economy.
To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specific topics: certain kinds of algae or plant life; the characteristics of particular fish or snails; or the trees surrounding the lake. Another person might take an overall view and instead consider the entire ecosystem of the lake from top to bottom; what eats what, how the system stays in a rough balance, and what environmental stresses affect this balance. Both approaches are useful, and both examine the same lake,but the view points are different. In a similar way,both microeconomics and macroeconomics study the same economy, but each has a different viewpoint.
Whether you are looking at lakes or economics, the micro and the macro insights should blend with each other. In studying a lake, the micro insights about particular plants and animals help to understand the overall food chain, while the macro insights about the overall food chain help to explain the environment in which individual plants and animals live. In economics, the micro decisions of individual businesses are influenced by whether the macro economy is healthy; for example, firms will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macro economy ultimately depends on the microeconomic decisions made by individual households and businesses.
