Demand and Supply are the fundamental concepts of Economics
and basics of market economy. Demand,
simply is how much (quantity) of a product or service is required by buyers. Supply
on the otherhand, is how much (quantity) is available for sale – there of
course would be other variants like the price, the place, the period, substitutes,
changes and more…
Demand is price-relative – it is how much of
quantity the market desires at a given price. Supply represents how much the
market is willing to offer at the given 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. The law
of demand states that, if all other factors remain equal, the higher the price
of a good, the less people will demand that good. In other words, the higher
the price, the lower the quantity demanded. When it comes to Supply, the higher the price, the higher the quantity
supplied. Producers supply more at a higher price because selling a higher
quantity at a higher price increases revenue. That would not apply to essentials – even here, on a longer
period, the market forces would try to stabilize. Even for an essential commodity, people might strive to consume
less and use less, if the price goes upward steeply.
Dr Manmohan Singh is a very learned person and he has
tossed the market theories in his own manner………
the petrol prices went up, immediately, people would start speaking of
not taking their vehicles out, pooling vehicles, going by public transports and
more plans – theoretically, the steepest price hike ever should have driven
people away and there should have been a situation where supply exceeds demands
– thereby more available in the market.. Whosoever’s design it was – there was
artificial demand – made acute by the panic reaction.. even after the price
increase the petrol was not available, and people madly stood in queues
fighting for a bottle of petrol at much higher prices at some places !!!! – now
if you are still on a queue or have been thinking of running away from office
in the middle in search of a petrol bunk where the fuel is available…………… wait….
(if only you can)
The good news is that 2 tankers carrying diesel and petrol have docked at the Chennai port on Tuesday [29/5/12] and a
third set to steam in today. The vessel
of IOC with 26,000 kilolitres of diesel, reached the city before noon on
Tuesday and began offloading its consignment.
Meantime, Chief minister J Jayalalithaa convened a meeting of officials
and later said retail supply of fuel would resume by midnight. The second vessel with capacity of 18000 kl of
diesel would start pumping out soon today. The third
one, a smaller one, carrying 6,000 kilolitres of diesel is expected to arrive
today evening. Chennai
Port has only one berth
for oil consignments. The chief minister
said 2,000 kilolitres of diesel would also be brought to the city from Bangalore by road. So the situation would ease soon and petrol
would be available more easily after all the chaos.
More than that, it appears that after the steepest hike, State-run
oil marketing companies are ready to cut the price of the fuel by about Rs 1.67
per litre on 1 June when they undertake a ‘price review’, according to a report
in The Economic Times. As has happened
in the past, the price rice would be corrected in shorter span – a tactics of
appearing to provide some relief by loading too high and then removing
something small later !!!
It is another factor that the first justification every
time has been that the State run Companies are incurring huge losses by heavy
subsidies and supplies at a controlled rate !!. Factually, Indian Oil Corporation (IOC)
reported a jump of 3.24 times in standalone net profit to Rs 126.70 billion for
the quarter ended March 31, 2012 as compared to Rs 39.05 billion in the same
period last year. For the year ended Mar. 31, 2012, it has posted 46.03%
decreased in consolidated net profit to Rs 42.25 billion as compared to Rs
78.30 billion for the year ended March 31, 2011. Still Oil Companies, Ministry and ruling Govt
while about losing money in selling fuel. Remember all these profits comes after the
mindless spending in advertisements and promotions and the high management
costs of the Corporation. Again a portion of this profit is aided by cash
subsidies and payments from other state-run companies to compensate for the
losses made from selling fuel at below-market prices. There are reports that BPCL’s profit nearly
quadrupled to Rs 3,963 crore. HPCL’s net profit also jumped more than 300
percent to Rs 4,631 crore from a year ago. Oil and Natural Gas Corp (ONGC),
despite its subsidy-sharing burden, also managed to post a 102 percent jump in
net profit to Rs 5,644 crore for the January-March quarter.
You may never understand the ground reality – it is not
Rs.xx hike in petrol that the aamadmi suffers – it would hit him everywhere he
goes – the commodities and vegetables will be up stating petrol hike, even non-related thing like rent might go up –
one has to grin and bear. Petrol is not subsidized
but this hike will push more people towards diesel, which is subsidized by
Govt. The Govt. has gone on record that it has no
intention of hiking the prices of diesel, LPG or kerosene (which are bigger
problems than petrol in terms of subsidies) in the near future.
As you count the holes in your pocket due to the petrol
hike, know that nearly 40 percent of the price of petrol is made up of taxes by
the centre and the states. Centre wants
the States to reduce the VAT to provide some relief ! Firstpost
reports that Central Govt. levies a fixed excise duty of about Rs 14.78 per
litre of petrol. States impose an ad valorem (value-added) tax, which increases
every time the price of the fuel increases. Among the States, the BJP ruled Goa is different – it is the only State to have slashed
sales tax dramatically in recent months: A few months ago, it cut nearly its
entire tax on petrol, making the fuel cheaper by Rs 11 per litre.
So whether it is Centre, State or Oil Companies – all unduly
benefit by every price increase……… if the rates are determined by market
forces, that is determined by what they buy, why is that there has never been a
steep reduction in price, when the crude oil barrel rates went down in
International market. The political game
continues, and more people are out there in the hot Sun, standing in serpentine
queue waiting for their turn for a bottle of petrol at inflated price !!!!
With regards – S. Sampathkumar .
Good post. I learn something totally new and challenging on websites I
ReplyDeletestumbleupon every day. It will always be helpful
to read through content from other writers and practice something from their websites.
Here is my blog ; fuel pump replacement
Go back all the way out, keeping your whooty
ReplyDeletehoot owl bathroom ensemble bum up the whole time.
And today, we have a some special equipment: We have your fitness
ball or your Swiss ball.
Also visit my site big asses