Some Economic Analysis
"SINGAPORE: The economic crisis might not mean lower business for everyone.
For the past two months, a stall at Toa Payoh had seen its business increase by more than 50 per cent.It is one of the many stalls enjoying good business at Toa Payoh Lorong 7.The stall sold a plate of rice with meat, fish and vegetables for S$2.20. But its stall owner said this price was the lowest it could go. Many of its customers were from the low income group. And thanks to the cooked food stall, the drinks stall nearby is also enjoying better business."
Source: Channel News Asia (Sunday, 08 March 2009)
As we can see there is a phenomena of substitution happening where people turn towards cheaper food as their income is reduced or at risk, so we can see the concept of decomposition happening in this case. Price elasticity or even income elasticity might be elastic as consumer switch to cheaper food which contribute such high increase in revenue. There might be a Bertrand Competition happening as stalls are fighting with each other using price by undercutting each other, instead of quantities, but the stall selling $2.20 might be smart or rational enough to sell it at a small margin above its costs. We also can see how such reduction of price in cooked food can bring positive externalities to the drink stall. Therefore, from the article, during a recession, we can still have oppurtunities to make a profit if we have the brains and confidence to do business, as low demand doesn't mean no demand. =)
P.S: Too much economics going on in sch right now... now starting to write another 3000-4000 words essay due next week... now also trying to be emotional stronger too and mentally stronger... less than 2 more months in school... i am starting to dread it... but thinking of school work and exams i want to end it fast... its a paradox.... i love the ppl who cherish me in sch but time continue to pass... i still have to part them in terms of seeing each other in school... hope i graduate we can continue to meet outside and hang out =) which is one of my wish too...
