Making money from crisis

Today i wanna talk about crisis. We know that crisis effects everyone accept children. Crisis occurs abruptly, it's like a wind. Wind comes and damages the tree leafs. And the tree leafs fall. The crisis is exactly the same. It comes suddenly and and a person standing in high position suddenly falls, mostly it effects banks.

But if you are wise enough! you can make money during this crisis. But you need capital. If your and ordinary person... it'll be arduous to gain big profits. But if you have capital and your businessman or you own a business you can gain vast amount of profits. For example during crisis assets such as houses are getting cheap and some industries are ending up bankrupt. And many things are getting cheap but for a while. If you use this moment and if you buy them during the beginning of the crisis, and then you can sell it at a high price after 1 or 2 years. Or even 1 month.

There is one more way to get rich. It's by internet. You can buy and sell shares of the public limited companies in internet. When the crisis started 1 share was 0.4 dollars. This was Russian bank called "Sberbank" but now it's shares are reaching 3 dollar per share. you see if you are wise enough you could buy 100000 of shares for 40000 dollars and now you could sell it for 300000 dollars. See how much profit is it? 260 thousand dollars of profit.

also here is a source this gives more information in details.

Also for businesses if they are really wise they can make a lot! during crisis.

As business chapter 1 summary

Enterprise: process by which new businesses are formed and new products and services are brought down to the market.

Entrepreneurs: individuals who form the business and makes it grow and takes financial risks.

Enterprise skill: skill that allows individual or organisation to respond effectively in changing market situation( for example change in prices) understanding the risk, thinking and acting wisely.

Characteristics of successful entrepreneur:

- passion
- making decisions and persistence
- ability to spot and take advantages of opportunities
- skills and expertise
- creativity, vision and creation
-willingness to take risks.

The importance of risks and rewards such as profit:

Failure occurs:
- lack of finance
- skills shortage
- complexity of regulations
- poor infrastructure

Most entrepreneurs are happy to take risks if the rewards are great enough. This depends on them doing researches to minimize their failure. Outcome of taking risks is profit.
For example Dragonsden takes risk by investing their money for another businesses.
also one of the most important characteristics of an entrepreneur is to learn from their mistakes and try again.

The notion of opportunity cost

Opportunity cost: cost of the next best alternative foregone.

Sometimes we need to choose and we need to make the best decisions.

Motives for becoming an entrepreneur

More people are interested in setting up business, because:

- long-term low interest rates, makes easier to borrow money for star-ups.

-change in the political climate, so the government supports start-up businesses.

- increasing wealth, which often means that people start to look for meaning in their lives.

Government support for enterprises and entrepreneurs

Government support enterprises because they increase productivity, employ people, which means to reduce unemployment and many other reasons. They encourage growth, makes economy grow if they are successful. New and more dynamic business causes an increase in competitive pressure in markets, with new ideas, technology and more efficient working practices.

Government has made measures to make it easier to start-up and run a business, and to support a growing business. It has done this by:

- reducing the taxes, trying to establish modern tax system.

- reducing barriers for raising finance for small businesses.

- improving support for small and new businesses.

- Making law to promote competitions.

- giving financial support for voluntary and non-profit organisations that are doing excellent work.

Hw economic problem

is it possible to have no scarcity?

I think it's impossible to have no scarcity. Because everyone one want's something entire world want's something and needs something. We make choices how can we live without choices. For example your going to a holiday trip, you need to choose the best one which suits you. The best one which your pocket can afford. But if you don't choose and just go to a holiday trip without doing any researches, your trip would end up as a failure. Also assume you have two choices choices. First one is a 5 star hotel for 1 week and the second is 4 star hotel for 2 weeks. If you choose the first one you will have more delectation. This is called opportunity cost you will choose the best choice which satisfies you. There are expensive things, for example drugs. You can buy an expensive drug and a cheaper drug. Expensive drugs are expensive because they are made of expensive resources which are really scarce. Wants needs and choices are everywhere.

This picture shows the distribution of scarce resources.


And this is the Small map which explains Problem of scarcity.

And drew this diagram to show what happens when resources are scarce. As you can see supply decreases and causes the demand to contract. And prices go up. For example oil it's price is always high.


Is it likely that some wants will never be satisfied?

Yes. For example governments wants to spend lot's of money on health care but they can't, they need to spend money on road constructions too.

Finally

Holidays are over! Now from tomorrow on ill start posting new blogs...

Why Don't Prices Decline During A Recession?

According to my idea, it's because the demand is more than the supply. People wanting more, and not getting that. So the decline in supply causes the prices to rise. But if prices rise, it causes people to save more. So the savings are gonna be more. This leads to the shortage of income. Prices won't decline during recession because money supply is less. If the prices will decline money supply will be more less than before, because demand is much more then the supply.

Economies of scale HW

The idea of economies of scale is that the more you produce, the cheaper becomes the product you have produced. And the the cost of production increases when there are massive amount of supply. Producing becomes expensive.

And here is the graph:


Output is the stuff produced( e.g look at the graph, look at the level of production) and cost per unit is the cost of the stuff per unit.
Long run is the average cost of producing, whatever you make: shoes, drugs, food.
If we look at the graph there is 0 in the beginning, according to this output can be whatever even one million.
Also we can see the point Technical optimum, it's the point where the businesses wanna be. Internal economies of scale is when people save money, cost per units going down. Internal diseconomies of scale, it's the cost of more money that their making for each thing.
If you look at the arrow which goes right, it shows that, the higher the output, lower the cost per unit gets. Every extra output you make, the cost decreases little bit. And the reason for this is firms getting bigger, they are taking more people and training them to do one thing and that person gets really good at it. So you make more money you can afford better technology's, assets.

As you can see when we pass the technical optimum cost per unit goes up. Because of overproducing. Everything will cost you more per unit. And the reason for this is when business get's really huge there are lot's of workers, lot's of staff, managers. And they all get confused, they make a mistake. They make wrong estimations and etc. This can cause overproduction.

And here is another graph:


The arrow shows that we can shift the curve downwards. It's because people are Learning by doing. So when we shift it down every point i that line is the cost per unit is less than before.
And this is done by Learning by doing, the more you do something, better your gonna be at it.


b-) For example if people grow less tomatoes, it means the output of tomato juice will be less, because cost per unit will increase. If people grow more tomatoes, economies of scale for tomato juice may reach technical optimum because the output increases. But if the business is careless it can cause overproduction and the cost per unit increases again.

HW- The immediate problem facing the UK economy is a large output gap and decline in aggregate demand.

I did 2 hours of research to come up with this idea. But i'am a bit concerned about it.(

I think UK needs to lower the prices for goods. But the prices are already low, but they should be lowered a bit more. I think tightening monetary and fiscal policies wont work. If we'll think of this, in a business way.... We should do more advertising, UK needs to supply their product to other countries, so the exports will be more. For example if firms and enterprises will do more advertisements(for example offering 1 supply for the price of 3, this should help). People would buy more products and goods and the cost of labor should be decreased which will make the goods and services much more cheaper.

This is not all, i think we should use Keynesians theory to accomplish the goals. Fixed investment should fall. People needs to invest less. And excess of savings causes interest rates to fall and then we will get rid of excess supply. So the savings will be equal to investment. The interest-rate fall prevents that of production and employment. People are gonna spend more. If we don't wanna cause recession again we should stabilize government spendings, cunsumption, Investment, and exports. While getting rid of execc supply we can improve the economy too.