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Economics - Essay Example

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1. When the price of a product falls below the equilibrium price, this creates a market where, because the manufacturer or producer are putting out less of their product/merchandise, the demand exceeds the supply. When demand exceeds the supply, there becomes a shortage of the…
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Download file to see previous pages... This creates a surplus or supply excess as the demand for the product is low, so consumers do not have to compete for the product. Because of the fact that the product is not in high demand, and competition between consumers is low, the prices will be lowered in order to make the product more attractive to consumers.
2. Inflation affects people’s standard of living and savings in a rather negative way. Inflation is basically a term which indicates an increase in the price of goods and services. In general, inflation occurs within a market as a whole, so the entire economy tends to be impacted. Peoples standard of living is severely affected because their money does not go as far as it once did. This is especially true in an economy with high unemployment and no cost of living increases for their income. Therefore, as prices grow higher, people have to stretch their dollar for daily necessities such as groceries, water, electricity, etc. Therefore, many families have to forgo certain things that are deemed to be luxuries in order to survive, which lowers their daily standard of life.
According to an article entitled, “Consequences of Inflation,” savings are affected because “inflation leads to a rise in the general price level so that money loses its value”(Riley). This means that the money in a person’s bank account is worth less due to inflation. In addition, inflation “lead(s) to negative real interest rates”(Riley). So, if a person has their money in a bank account that is supposed to gain interest, they are actually going to be losing money as the interest rates are negative.
3. A stock is defined as a security or assurance for an individual or business that allows a person or company to have a certain percentage of ownership in the profits or assets of a specific product, business, or company. The benefits associated with purchasing ...Download file to see next pagesRead More
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