Grade 8B
Analyse how study of spending, saving and borrowing pattern of society help Government and firms in important decision making process.
Time Duration for submitting the Article is:
September 9th to September 15th, 2013
Write here your answer in 500 Words.
Write here your answer in 500 Words.
The study of spending, saving and borrowing is very important especially for government and firms. Spending, saving, and borrowing come from income so they will know how much they must pay to the workers so they can survive. but the workers should save, spend, and borrowing so they have preparation for their future. For example a chef receive $2000 each month, they must know how much should he save for the future and how much should they spend to buy their daily needs. sometimes they must borrow money from other people if their wages is not enough to fulfill their needs in order to survive. if a firm receive high amount of income usually they will spend more on their wants because their needs is already fulfilled. Some workers that receive only a little amount of income they will be satisfied already if they can fulfill their family needs and they can pay school fee for their children. Usually the rich people will choose to spend more to buy an expensive goods so they will become popular in their society. To decrease discrimination the government give rules for the firms. The government will give a minimum wages so the workers can survive and their kids can go to school. For example in japan the government give the minimum wages for the Japanese workers annually is $16.997. this is to make sure the people are able to complete the family needs and have a secure feelings in doing their works.
ReplyDeleteGovernment also study on how much and how often the people tend to borrow money. This is to see and forecast the ability of the people. This is how the government set the procedures, regulation and also the amount of interest on loan. So everyone have the same chance and responsibility in processing on taking loans. They also have clear view and knowledge on the rules and regulation as well as the amount they have to have back and also the way they have to pay back. They must control their borrowings so they didn’t get trapped in the debt trap. This rules are also applied in firms. There are some firms that provide loans for their employees. Although they do not charge on interest to their workers but rules and regulations are still applied. Usually the number of loans that the firms provide will not be as big as the amount that the banks offer. But employees tend to borrow from the firms because they are not charge on interest and the process is shorter. While the firms will have certain number of concideration on landing loans to the workers such as the attitude, background, and also how long the worker have been working in their firms. This is due to the possibility that the worker maybe able to return their loans.
Although there are possibilities of borrowing money it will still be better for the peoplen actually to control their spending patterns. It is because loans are still need to be paid and when they borrow actually they will even have a harder time in their future as they have to complete paying the loans which actually reduce their income.
Vincent CIA
8B
The study of spending, saving and borrowing is very important especially for government and firms. it might be useful to know about the spending , saving or borrowing of that country . From here , government can make some decision like making programs , rules or fine . Every country will need this kind of pattern to control their country . Some of them use it to make their country richer or decreasing the debt of the country . Because if the country have a high debt , they may not pay it back and the country may have a drop in their money currency and have a bad image on other countries. Firm will also used this to make a decision for worker’s wages and making the products. .
ReplyDeleteFirst we gonna talk about the spending . Government usually see how rich their people is from seeing the spending pattern ..This spending pattern can be used for them :
1. To know what product did their spend most . Government can increase the production of this product so that every people can buy it . Like ex ample in Indonesia , people are likely spend most of their money on rice because its their main food . Some of them cant eat without it because they can cause some disease for them like example stomachache . So its very important for the government to know it and supply the product .
2. They also used it to know how rich their people are . If most of them are spending in luxury goods , it means that their country is getting richer and all people will now can get a high quality of product because they already have enough money to spend on it . If there are still many people spending on primary goods , it means that their country is still poor .Government can also used it for the tax . If people are getting poorer , government can reduce the tax that they must paid like example before its Rp 500 000 per year , but know they only must paid Rp 200 000 .
Firms also need this spending pattern . They usually used it for :
1. to know what is the best selling products . From here firms can make another product that have the same style with more advantage . This can make many people also spend their money on this firms product .
2. they also can know is it their wages already enough for them to buy their need s . Because from spending pattern , firms can see , if there are still many people spend their money on low quality goods , it means that their wages still doesn’t enough to fulfill their life.
Second , we gonna talk about the saving . saving pattern is really important for the government because :
1. It is used for the government to know the average saving of their people . If the people are spending less . Some country are making some suggestion to save more rather than the spend . This is because that saving money will be used for them later when they are old . When people are getting old it means that they will also stop working . if they are stop working , they will not get some money . So its really important for them to save . If there are many people saving for their old age , government can reduce the pension money and the old houses . Instead of spending on this , they can used the money for building the country .
2. Because they can know is there many people saving or not . they can make some program for it . Like example they are making some program for the young children to learn how to save their money even though they were still a kid . This can encourage them to save for their future so that their parents later will not be so heavy to pay the college / university payment . its also good for them so that they learn how to save and control their spending .
Third , we gonna talk about the borrowing . its really important for the government to know the pattern because
ReplyDelete1. Government can know how many people are borrowing money . If there are too many, government can make the interest rate higher and make some fine for it if they cant payback . This can make people start to reduce the borrowing because some of them borrowing money but they never pay it back .
2. They can know what bank that have been borrowed their money a lot. Sometimes bank are continuously giving some money to their customers but they don’t ever think the rest . there are some bank that get bankrupt because of it and there are also bank that get bankrupt because people that borrowed the money cant pay it back . So in here the government can give some advice to the bank , and reduce the risk of getting the bank bankrupt . Because if there are banks that get bankrupt , it can effect all the economic y of the country .
So the conclusion is that spending , saving and borrowing pattern is really important for the government and firms . Without it , they may have some problems that can occur .
kezia
8b
People spend money to satisfy their needs and wants. People save money, for incase there’s something urgent and they need money to pay, they can or we can say as a backup, ex is if suddenly our relatives get into a car accident, and need to do operation right away and cost a lot of money, we can use the saving to pay the bill. Borrowing, when we don’t have enough money to purchase something and we asj money from another people or firms, its also can be said our spending is bigger is bigger than the income. Borrowing, can be good and bad. When a firm borrow money, either from another business or from the bank, they’ll use it for something useful and not going to be wasted or being spend for nothing, they will invest for something bigger and when they have the profit, they’ll pay to the creditor.
ReplyDeleteIn buying and selling market, government and firms always analyze the spending, buying trends patterns of the consumers’ behavior. Each area, the people there have different behavior, spending and etch, its different in all part of the world. Firms, business and government study about the consumers’ spending patterns, borrowing and saving behavior. They study them so that they will know how to act in the society, what to produce, by knowing the trend, setting up the right price so consumer can afford the goods and service with a standard price, for example: the price of prada is cheaper in US compared to indo. The firms study about these patterns so they can influence them. These patterns always change so itll bring changes to firms’ behavior too.
Spending, or we can say as consumption is the activity that people do to satisfy their needs and wants, they consume the goods and services firms produce for them, with the exchange for money. The power that want to satisfy these is called utility, when we “want” to buy or consume something, our utility increases, and when we consume it, and feeling enough our utility decrease, an example is a guy eating 1 cupcake, and he wants more, there his utility is increasing, when he have a table of cupcake and eat them, they feel full and his utility will decrease. Their consumption their income, wealth, their behavior, and their confidence about the future, like what will happen after they take the choice.
Savings, most of us have savings on banks, which we save since were little and use it later in the future. But how? We don’t work and cant make money yet, so our parents is the one who save some of their income and put it in the bank for us. The factors of saving are also the same as buying, the people who think that saving is really important, they’ll save more than spending. The people who’re so confident about the future will turn out okay so they shall spend more than they save. When their income and wealth increase, their interest and willing to buy and spend more will be bigger than if they are poor.
Borrowing, is when our spending is bigger than our spending, means we need more money to consume something, but the money that we borrow must we pay back, but of course, with interest. The lower the interest is, the more will be the demand for borrowing, but if the interest is high, people will think twice if they should borrow or no. so the lower the interest is, the more the demand. Firms, can borrow money to invest, but if they borrow much and cant pay back, they will be trapped into the debt trap, where the %of bankruptcy is pretty high.
So, in conclusion for each activity like consumption, savings and borrowing each have the factors and most of them are almost the same, with these reasons and patterns, the government and firms shall know what and how they act in the society. These data they collect to help them decide changes in the country’s economy.
thankyou-thania vireta 8b
Spending pattern, borrowing pattern and saving pattern will influence the behavior of people. For rich people they will spend more and save more than borrowing. But sometimes rich people must maintain their assets so they will borrow more to buy new asset or open new business.. Sometimes this behavior will effect economic condition in 1 country. So government and firms must study and know information about spending pattern, borrowing pattern and saving pattern to determine what decisions they will choose.
ReplyDeleteWhen the interest rate is low many people will borrow from bank. When the people borrow maybe they will use their money to spend more, but after that a new problem appears. Their disposable income will reduce the payment of debts. Paying debts can influence your spending pattern and hurt economic growth. So usually government will make new rules or decisions that only useful for these current situations. Government will reduce interest rate and make a rule that makes borrowing harder to do. When a firm sees the spending pattern of people change( in this condition people doesn't spend more because of paying debts), so firm will give a big promotion to customers such as discounts, buy 1 get 1 and door prizes. So this act will attract people to buy goods or services that the firm produce. When the interest rate is low many firms will borrow money to expand their business, to search and develop new products.
When the interest rate is high, people will save more money and reduce their spending activities. So the firms will try to attract people to buy their products. This situation causes banks to grow rapidly, government will not stay quiet because if this situation continues many firms will collapse and it impacts the economic condition in that country. So government will reduce the interest rate and give subsidy to poor people and to small firms to spend or buy stuff. The firms will search new products with low price and it can satisfy consumer needs and wants. Some firms might reduce their employment to cut their cost of sales if the customer spending pattern decrease rapidly. Many firms also try to have a new business that follows the taste of consumers examples are: masks, hair spa, etc.
For example not so long ago the price of gold falls. So the demand for gold increased, but the problem is there is not enough gold to sell so government helps gold traders by determining the minimum price of gold. But today with the increase of the price of dollar, the price of gold also increases So many people sell their gold. The people sold their gold and invest in dollars with the hope that the price of dollar will always increase and they can make a profit for that situation. Government knows about this problems and government increases the interest rate so that people will save more and the price of gold is also being protected by the government so that it won’t fall or rise too much.
So in conclusion government and firms must know about spending pattern, borrowing pattern and saving pattern to determine what decisions they will make to protect the businesses and our country.
Spending is the activity when we use our money as the tools for barter of goods and expenses, saving is the activity when we do not use our money for anything and keep it in the bank or somewhere else and borrowing is the condition than we borrow money or things from bank or someone.
ReplyDeleteStudy of spending, saving and borrowing pattern can help government and firms in important decision making process by if you are one of the staff in the government organization, you can help the government so they can use the money to buy things that’s better, so the government won’t waste the money, also we can also help the government by when we save the money in the bank, bank have money and when someone need to borrow money to the bank to open a new business, so we can help the government if the government want to make a decision that every family, at least one person to work. There are more things by studying spending, saving and borrowing are if we can control our spending in transport, it can prevent the government decision to import more crude oil from the other country. Firms also can take benefit of making decision for firms’ expenditure, firms also can become bigger by borrowing money from the bank so they can increase their capital to make the firm bigger or the money can help the firm by preventing the firm to be closed if they almost bankrupt by the money they loan.
But study of spending, saving and borrowing pattern can help government and firms in important decision making process because sometimes a person use their money only for their own happiness, so if government want to make an important decision, it’s hard to be made because sometimes some people demonstrate to the government of what decision they want to make, so it can affect the decision and if the government want to make the rules that every person must have their own saving, so they still can survive when they old, it is hard because some important decision like it can be canceled because everybody have different needs and wants, so if they have want to make a decision about saving, some people can’t follow because if a person work and the money only enough to buy food for his family, he can’t save his money. For the case that a firm borrow money from the bank, they must pay the interest for borrowing money from the bank and if the borrow money too much and they can’t control their usage of the money they borrow, day by day, the firm can get trapped to the liabilities trap, and the bank can take their assets and day by day, they can bankrupt of their loan.
So, as the conclusion, I think study of spending, saving and borrowing pattern can help government and firms in important decision making process, it depend on the decision, and maybe some of the decision can’t be accepted by everybody and some can be accepted and about the study, it depend on what condition it can help the government and firms.
Richard Sanders-8B
How do people spend their money ? People spend their money for buying goods and services . The spending pattern is affected from the income that he/she got. If they got a low income , they will spend their money for important needs . What is spending ??? Spending is also usually called as consumption . Consumption is a major concept in economics and is also studied by many other social sciences. Economists are particularly interested in the relationship between consumption and income. So , like what I said before , that our income is also affect our spending . If you have a high income , you will buy everything that you want . The second one is we gonna talk about saving . First , what is saving ??? Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan . So , for example , I will give you $100.000 . What you gonna do with that money ? Either you will SAVE or SPEND that money . If you save your money for your future , you can survive for whole of your life . But if you spend your money , you will only can feel that goods for a while . So , people have a different habbit of spending or saving their money ( income , salary , wages ) . The third one but not the last , is borrowing . What will you do if you don't have any money ? You can borrow from anyone of your society. What is borrowing ??? Borrowing is how people have their money when they have no money yet. Borrowing have 2 impacts . The first one is Positive and the second one is Negative . What are those positive impacts ? Those are helping for your survival and capital creation ( capital expansion , capital deepning ) . It can help you for your survival , it means that you can have the money first for your future then you must pay it back to them . The negative are that you must pay interest rate. If you borrow more, of course the interest rate also increase . As you borrow more , the interest will always be higher. But , if you couldn't pay the interest rate + the money you borrow , they may put you into jail . Borrowing from someone have a bad impacts also .
ReplyDeleteHow do people spend their money ? People spend their money for buying goods and services . The spending pattern is affected from the income that he/she got. If they got a low income , they will spend their money for important needs . What is spending ??? Spending is also usually called as consumption . Consumption is a major concept in economics and is also studied by many other social sciences. Economists are particularly interested in the relationship between consumption and income. So , like what I said before , that our income is also affect our spending . If you have a high income , you will buy everything that you want . The second one is we gonna talk about saving . First , what is saving ??? Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan . So , for example , I will give you $100.000 . What you gonna do with that money ? Either you will SAVE or SPEND that money . If you save your money for your future , you can survive for whole of your life . But if you spend your money , you will only can feel that goods for a while . So , people have a different habbit of spending or saving their money ( income , salary , wages ) . The third one but not the last , is borrowing . What will you do if you don't have any money ? You can borrow from anyone of your society. What is borrowing ??? Borrowing is how people have their money when they have no money yet. Borrowing have 2 impacts . The first one is Positive and the second one is Negative . What are those positive impacts ? Those are helping for your survival and capital creation ( capital expansion , capital deepning ) . It can help you for your survival , it means that you can have the money first for your future then you must pay it back to them . The negative are that you must pay interest rate. If you borrow more, of course the interest rate also increase . As you borrow more , the interest will always be higher. But , if you couldn't pay the interest rate + the money you borrow , they may put you into jail . Borrowing from someone have a bad impacts also .
ReplyDeleteSo in conclusion , people have their choice to use their money . For rich people, they can spend their money for everything they want . We have spending , saving and borrowing. Spending is spend money for buying goods and services . Saving is how people do save their money from the money they receive . And the last one is borrowing . Borrowing is how people having their money for a short period of time to use the money for their important needs . More borrowing, more debt you have . We have also debt trap . It's mean that if you are borrow money form someone else , but you have not return back their money , you will get a problem . It is called debt trap . That's all from me . Sorry Mr Bipin for some wrong / false grammar .
ReplyDeleteLeonardo Steven - 8B
Spending , saving and borrowing pattern of society help Government and firms in important decision making process . For the reason above
ReplyDeletePART I
ReplyDeleteActually government need the study of spending, saving and borrowing to know and keep balance and increase the quality of country's economic development. By the study of these topics, they know the people or their citizen spending and consumption trends, not to make a lot of debts from another country, how much and how important their savings are and lot of other important things for their economic development.
The study of spending, saving and borrowing is very important either for government, firms and a person or individual because for the following main criterias :
1. The Study of Spending
Spending is a must for a country, because we can't rely on obtaining loan from another countries. There are two sides for a country's spending. One for citizen side and other for the country's needs.
A. Citizen Spending Trends control
Government need to know the citizen spending and consumption patterns and trends. If the government know already the citizens spending and consumption patterns and trends, they can and have ability to control it, for example the government doesn't recommend for a certain product or trend for the citizens to buy of to spend for, so they will give, set or put a very high tax on that product or trend. Or the government doesn't recommend the citizens to buy or consume many imported goods from other country, so in order for the goods to be imported by the government, they will have to manage many restrictions, laws and policies that are set by the government.
B. For the country's needs
The government need to buy goods that are really required for the country or known as the importances for that country. Before that, they need to discuss it. In the discussion, they will include the level or how important the goods they are going to buy is, how much the price and for what they use it. For example China, they are focusing in buying the stronger and stronger military equipment and tools because it's said that China buy those military equipment from Russian. They want to have stronger military power than America. But with another country, Japan, they are focusing in spending for Technology and Science study equipments and materials needed.
2. The Study of Saving
The government should maintain and take much attention for the country's savings because the country need to save their money for paying the upcoming expenses.
A. For knowing the purposes of their savings
Every country need to save because of several certain purposes. May be after a certain discussion, for example they think later on the country need to buy dollar to keep the country's assets stable because they think in several weeks, a dollar value will be increase, if they don't save for many dollars, they will have unstable economic. So in this case, the purpose for the country in saving dollar is for keeping the country's economic stable.
B. To financed the upcoming country's development needs and other unexpected needs
The country needs to save for the upcoming country's development funds, for example Citizens health care, new constructions, and many other else. Any besides that, the government also should ready to financed and pay for the unexpected fund, for example natural disaster fund in rescuing the people after the tsunami in Japan last several years, the government should fund the equipments needed, and many other else, they can’t reply only from donations or loans.
Then continue to the next part ...
DeletePART II
ReplyDeleteThose saving and spending is a must actions for a country. We have discussed those studies, now we look at the borrowing of a country.
3. The Study of Borrowing
The government need to study for borrowing that is very useful in a country economic danger situation. Same with the government, firms and individuals will usually borrow money and create loans if they have no enough money to continue the future actions. These are the following factors that explain why they need the study of borrowing.
A. To know what is the exact reason
The government need to know why they need the money from loan, so they can really use the loan maximised and well, not wasted or not enough. By know the real reason, they will be given trust from the loan provider.
B. To know for what things and expenses the the loan is
By knowing the details of for what the loan is, government can calculate the details and can return the loan and to prevent debt trap.
C. To Prevent Debt Trap happen
Government should really understand of what commitment they made. They should have complete calculations details in order to appoint or made a commitment to the loan provider for when they will return back the money with settled interest.
But a government, firms or even individuals may need no study of spending, saving and borrowing. They can use their logics in taking actions. They can just do simple calculations for their spending, saving and borrowing. No need to study about spending, saving and borrowing.
So, in conclusion, for more details in taking actions for a government, firm or an individual such as in their spending, saving and borrowing, they need to study about spending, saving and borrowing in order not to get in trouble, because they will know what they are doing for taking a certain actions. But not with for those who don’t study about these three topics, they will more easily get into trouble because they only can do with logic things, and they don’t know about the details of what they are doing.
Spending saving and borrowing will influence the consumption pattern of the people in a country. If they save more, the spending will decrease. When people borrow money more, they will spend their money more too. This information I sometimes used by the government and firms to make a decision. For the government, the pattern of spending, saving, and borrowing will influence the decision about government rules and regulation, such as: fiscal policy and monetary policy. For the firm, this information is used to make a decision about the selling price of the product, what kind of product that will make, and how much cost is needed to produce, so the price of the product is not too expensive for the people.
ReplyDeleteSometimes, government will increase the interest rate to stabilize the economic condition of one country. This cause people to save more and will reduce borrowing from bank. For example: not far from this time, government of Indonesia is increasing the interest rate to hold the price of dollar that we know dollar is increasing rapidly nowadays. This government decision automatically influences the saving and borrowing of the people. Many people hold to spend their money and choose to save in the bank more. Also, people that want to borrow money from bank is also postpone until the interest rate is back to normal. This decision of the government is made because, lately people spend their money to buy dollar, so in the market, and dollar is scarce. This makes the price of dollar is increasing rapidly. Government looks at the new spending pattern of people. To protect the stability of the economic, bank of Indonesia who acts as the government decides to increase the interest rate.
For firms, the spending pattern is determining the kind of product that they produce, the price of product, the way of distribution of that product, and the quantity of their product to sell. When the spending pattern of people increase, firm will produce more products. When the spending pattern decrease, firm will reduce the production and start to search and develop the new product that is expected to satisfy the consumer wants and needs. Sometimes, the borrowing pattern will influence firm. When the interest rate is low, or firm needs money to expand their office or to develop new product, usually, firm will borrow money from the bank. Which is that we know, the factors that affect the level of borrowing are: interest rate, wealth, consumer confidence, ways of borrowing, and the availability of credit. So, sometimes a firm also is warned about the customer borrowings pattern. When the borrowing pattern of their consumer is increasing or high, the firm will limit the amount of money that is permitted to be borrowed by customers. So, a firm will decide maximum limit credit of that customer.
In conclusion, the information of spending pattern, saving pattern, and borrowing pattern, is used to determine the new regulation or new rules of the government and the firm. So, the government and the firm can anticipate the changes of economic that will happen, or, the changes of people’s behavior in use of their money.
Celine Kusnadi 8B
The spending, saving, borrowing pattern is a pattern of groups of consumer that tells about how and how much do the consumers spend their money on. This is extremely important for the government to monitor the consumer. For the firms this study is to know what the consumer wants to buy. Different types of people have different types of patterns. Firms and the government study the consumer spending, saving, borrowing patterns everyday.
ReplyDeleteThe government and firms would use these spending patterns as a clue for decision making. How does this study help both public and private sectors for decision making?
The spending pattern:
1. To understand what the consumer spend their money on. Different types of people spend their money on different things as some people prefer to invest their money on one particular thing rather the other. While others prefer to invest on everything equally. For example people who are interested in programming are going to spend more on electronics than others who aren’t highly interested in programming. Firms would produce what products that the target market without taking a risk of having a loss because of lack of information on the target market. No firm would want a risk that big.
2. To know if people are consuming on positive items. The government always discourages the consumption of harmful product, and encourages the consumption of essential products. Most of the time the government would use the taxes and subsidies method. Studying people’s spending pattern would help the government to decide on which products should be taxed higher than normal and which products should be subsidized in order to encourage or discourage the consumption of these products. For example Alcohol has been known for being taxed because the government studied and found that many people has been consuming alcohol despite the dangers that come with it. Oil or specifically gasoline or car fuel has been known to be subsidized by the government as the government studied and know that gas is essential in a developed country and the government wants to encourage the consumption of gas so they subsidized it increasing the demand and consumption for it.
The savings pattern allows the government and firms to know how much people are saving their money. For the government this info would allow them to know if there are enough people saving their money, if not the government could decide if it’s worth spending money to encourage saving money.
The borrowing patterns: To know how much people borrow. This would help the government in deciding whether not the national interest rates should be changed, because of economic problems. For example an increase in borrowing rates would force the government to lower the interest rates to reduce so less people can’t pay back the debt they have. In other situations in order to reduce the demand of borrowing the government could increase the interest rate to prevent a big increase in demand of borrowing before it happens.
In conclusion, the government studies the patterns to make decisions that could not be done without the consumer’s pattern of spending, savings, and borrowing pattern.
Ivan Didik Abadi Wutama
The study of spending , saving and borrowing is important especially for helping the government and firms in important decision making process. Why it is important? Because it is important to know, like example for the government, they need to know what most percentage people spend money for and the less percentage people spend their money, if most of the people spend their money to the dangerous things such as cigarette, the government will higher the taxes of the cigarettes. While for the firms, they need to know the study of the spending , saving and borrowing so that they can analyses the wages given for their workers.
ReplyDeleteIt is important to study about the spending , saving and borrowing for the government and the firms because they need to know about their residents in their country whether they are rich or poor, if their residents income is low but the interest rates that is given by the government is high, poor people will not buy that good and services so the spending in that country is low. If the government doesn’t know that their residents is poor while wants are high so many people will borrow the money from the bank , if they can pay so that their economic in that country is low and in the other country eyes they will also see that our economic is low and it become a bad image. For the firms they need to know whether the residents spend more in what goods, so the firms can make more product on that things. Every government always want to have a high economic in their country and they also want their residents to save more rather than their spend. So that the government will encourage their people to save more, example they encourage by giving a higher interest rate to the one that save much money at the bank. The government also can decreasing the price of the good and services so that the poor one can buy and no need to borrow money from the bank, they also can increase the interest rate to those who borrow much money to the bank.
Not always that only the government and the firms that the studying of the saving, spending and the borrowing is important, it is also important for the children to study , so that they can understand and at the future or at their daily life they choose the useful goods and services so they not get trap in the debt trap, and they all can learn how to save more rather than spend more on their daily life. They also can control their spending, and can manage to only spend to the important things and no need to spend more for the un useful things, they can buy the things for their wants only for their own pleasure, and they need to think to not over spend in their wants.
So in the overall conclusion is the studying of the spending , saving and the borrowing is very important especially for the government and the firms, because for the government they need to know about their people whether the people spend more or less, save more or less, borrow more or less, because it can affect the economic in the country if the people do bad things and like to spend more rather than save. For the firms they need to know the people spending , saving and borrowing so that they can know what goods and service they need to produce more so that they can get much profit. So it is important for the government and the firms to know about the saving, spending and the borrowing of the people.
-Shelvina Gabriela 8B-
How study of spending , saving and borrowing pattern of society help Government and firms to make decision , usually firms and government must check the spending , saving and borrowing of a certain country because of many factors such as more profits for firms and better managing the country for government.
ReplyDelete1. product with the biggest sales
firms can choose to produce the best selling product so they can earn more profit in the business but like for example a business that sell bottles can change to plastic spoon because maybe plastic spoon sales are higher than the sales of bottles and for government they can choose the product they will subsidy and the product they will give taxes so for example sales of plastic spoon is high while the sales of bottles is very low government could give subsidy to the bottle company and give higher taxes to the plastic spoon company because their earning are different.
2. to fix economy problems
The government must know the saving , spending and borrowing pattern in order to make the certain country economics stable such as if to much people borrow money from the the bank government must higher the interest rate in order to stabilize the economy and preventing people to have debt trap and if they don’t to much borrowing can hurt the country economics and if the there is to much saving government also can lower interest rate so people will save less but they will spend more and so this is to stabilize country economics and the last is spending so government can higher the price of items or by doing inflation so they will borrow or save more and its also to to stabilize the country economics too.
3.to know the country economics
The government can know about the country economics or does the country economic is getting better or the country economic is getting worst like for example if the country borrowing is high that means there is a certain crisis happening maybe inflation because the price of goods get higher but their income are still low so it forces them to borrow money in order for them to have enough money for daily needs or for their family survival so the government can know that the country economics is getting worst but if the saving and spending are getting higher and the borrowing is getting less that mean the country economics Is getting better .
So in my conclusion its very important for government and firms to know spending , saving and borrowing pattern of the society like the firms to choose the type of business or job that they could earn more profit and for government to know and control the spending , saving and borrowing of the society so the country economics will be stable and be better and also to know about the country economics is getting better or getting worst so they can manipulate the country spending , saving and borrowing.
Spending is to pay money, usually in exchange for goods or services. Saving is the portion of disposable income not spent on consumption of consumer goods but accumulated. Borrowing is receiving something of value in exchange for an obligation to pay back something of usually greater value at a particular time in the future.
ReplyDeletePeople with low economics will tend to save more than spending. Because saving can gather money for the future and can be used for emergency situations, like when we need to pay for an operation. While people will high economics will spend more than saving. Why? Because they know that they have more than those people who are in need. They have money to buy things they want to. Their desire to have things they want to are big. So they will prefer to spend in order to fulfill their wants. People with both high and low economics will ever borrow money. Why do we borrow money? We borrow money to increase our capital and modal for the company, it can also be cause by our company’s financial problem. That is why we borrow money, can be either from the bank or individual.
Government spends money for a variety of reasons including to supply goods and services, to achieve supply-side improvements in the macro-economy, to reduce the negative effects of externalities, to subsidize industries which may need financial support, to help redistribute income and much more. Government saves money if it adopts energy efficient program, by not issuing registration stickers and much more. Government can borrow money from the world bank borrowing.
But why is the spending, saving and borrowing important for the government? It is important because it helps to show clearly the amount of the transaction of money. It helps the government to set goals and help them see well and look forward to the future of the amount of money they can save, or the amount of money they need to borrow and the amount of money they need to spend.
Firms spend money for variety of uses. They need to hire management consultants, marketing, advertising, man hours, electricity, and much more. Firms saves by cutting costs when setting up your online store, by getting a suite deal, by being mobile, by hiring your children, save by association and much more. Firms borrow money because of many cases, such as when the company have financial problems, in other words, bankrupt. And when the firm wants to increase their capital but they have no enough money, they will borrow money, can be either from the bank or individuals.
Spending, saving and borrowing patterns are also important for firms. Why? Because firms need to prepare themselves better. They need to prepare their goal. Firms that are preparing themselves well, have their own thinking of saving a certain amount of money, borrowing a certain amount of money and even spending a certain amount of money. This explains why spending, saving and borrowing patterns is important for firms and companies.
Regina Tanugrah 8B
In economy, there are 3 ways to use money, that is, to either spend, save or borrow. Every person has different spending, saving and borrowing pattern as each and every one of us have different income rate and different lifestyle.
ReplyDeleteSpending is the act of using money to buy goods, in order to satisfy their wants and needs. When we consume goods, our satisfaction increases. The way we spend depends on few factors; Income, When we have a high rate of income, we tend to spend more money because we have the money too. Consumer behavior, everyone have different tastes and views on goods. Future expectation, a person would invest/spend more money when they expect a lot from the certain good (Ex. Machines). The bad side is that, by borrowing, when we pay back, there will be an interest and by so, we have to pay more than what we borrow. Other than that, by borrowing, it could cause a person to bankruptcy, this happens when the debt trap happens which is the cycle when we borrow from someone and borrows from someone else to pay the previous loan.
We do saving by storing our money into a bank account or somewhere else, a person tends to save their money into a back account because it’s safer. A person saves so the money acts as a backup in the future, when money is needed or pension. As against the spending statement from above, when we have a low rate of income we tend to save more, in order to be used in the future, like, to use expanding business.
When spending is higher than the income of a person, the person would borrow, in order to help. Borrowing is good but yet it’s also bad. It is a good thing when we borrow so that we can use it productively, like, expanding the business. When expanding, it can be divide it to 2: Capital expansion and capital deepening.
A spending, saving and borrowing pattern shows the decisions made by the consumers (us) and by studying it, the government can decide on what to do, for instance, the government could raise tax on bad goods which are high on demand (Cigarettes) or raise subsidies for important goods. While the firm could increase their production on certain goods that’s high demand by the consumers so that they can earn more profit.
It is concluded that the study of spending, saving and borrowing plays an important factor for the government and firms when choosing and making decisions and helps them so that they can make the right decision on deciding what to do about the country’s economy (Government) and what they should sell (Firms).
Grace - 8B
Study of consumption, saving and borrowing pattern is considered crucial by governments (both developed and developing countries) and by many companies.
ReplyDeleteCONSUMPTION
By observing consumption patterns and trends, we can see that people on lower incomes tend to spend their disposable income to meet their basic needs such as: food, home and clothing. If they have extra to spend then it will be used to satisfy a few “wants”. On the other hand, people on high incomes may spend far more on luxury items and leisure activities to satisfy their wants (their basic needs are pretty much covered already), yet in overall consumption is still lower of their total disposable income. Factors that affect the consumption level of society are wealth, consumer confidence and interest rates. Government requires study of consumption level in order to manage and control the country’s economy better. For instance: Lately we can see that Indonesia has been experiencing a sustainable economic growth;
a. Real incomes have risen (Jakarta’s wages has been spearheaded to increase to a minimum of Rp 2.200.000 which subsequently followed by other provinces)
b. People are more health conscious (many restaurants, caterer and food industries promote no MSG and preservatives in their product and increase the usage of organic product, even rice in KFC a.k.a fast food restaurant is offering organic rice). This means people are willing to dig their pocket deeper to get a better quality of life.
c. Stock index IHSG reached to 5.068 in May 2013 which indicate many funds were invested in the stock market
d. Other indicators such as : higher number of Indonesian tourists during holidays (even in business class airplanes), property booming (lots of land, apartment, shop-houses being offered and enjoy price escalation in just few months!!)
By observing those phenomenon, government must control the economy to avoid currency weakening or deflation which might lead to bankruptcy, employees losing their jobs/unable to pay their mortgages and eventually even the banks themselves must seek government help to survive due to insolvency. Last August, we have heard that the government is planning to mitigate the issue by increasing luxury tax (PPN BM) for luxurious imported car to 125%.
Several companies also use the study of consumption behavior to promote their product, control production and projecting their target. For instance;
1. Many new travel agencies arose within last few years, whilst the existing ones introduced premium products (traveling to exotic destinations and luxurious cruises). Some destination such as South America can cost around $8,800 per person (exclude visa, additional tour, tipping & airport tax).
2. Several high end food markets flooded their products with imported items such as raspberry, blueberry, black cherry, Alaskan salmon, caviar, fish roe, rosemary, dill, potato chips, chocolate liquor, goat milk soap etc. These products indeed exist and often run out in the display counter due to high level of demand and consumption.
3. High end beauty parlor which offered Korean cut, imported brand of hair dye and hair treatments, face & body treatment (botox, filler, eye brow threading, waxing, slimming program etc.)
SAVING
Saving behavior may vary according to income, age, family circumstances and culture. Government observes saving pattern in the society to control the economy of the country. Usually when the economy rise, income will follow to increase hence people will have more income to save. However the relationship is not so straightforward. Saving will reduce when there is recession and people need more money just to cover their basic needs. As we knew that around July 2013 IDR is weaken against USD, which eventually penetrate above Rp10.000 and now is sitting at Rp 11.400-11.500.
Government then on 12 September 2013 announced another 25bps BI rate to 7,25% in the attempt to stabilize Rupiah and control inflation rate. This rate is the benchmark of deposit and lending rate. As we know when interest rate increase, people then increase their saving because they will get higher yield and people reduce their borrowing since their production result will not cover to pay the borrowing installment.
ReplyDeleteOn companies perspective, study of saving pattern will also help them in issuing the right product and produce more realistic budget. For instance:
1. People sometimes save money in order to make bigger purchases later on such down payment of housing, car or children education. Hence finance companies or banks or school foundation formulated their product in such to accommodate society pattern.
2. If interest rates were high and consumers tend to save their money and refrain themselves from buying imported and branded products then importer will not produce aggressive budget and start evaluating their costs (reduce number of employees, review rent cost, reduce entertainment, delay renovation, postpone purchasing etc.) to meet certain profit margin that they required.
BORROWING
People borrow money for many reasons, mostly for mortgages, car loan, set up business, business expansion, study loan and many others. The most critical factor in borrowing is interest rates. Government definitely need study of borrowing pattern to control the country’s economy. We haven’t forgotten USA experience in 2007-2008 where the citizens have too much borrowing than their income can afford to and eventually lead to Great Recession in USA. The citizens were approved to have housing loan easily without prudent analyze on their income and total loan that they already burdened.
This unfortunate circumstance lead to high unemployment where the rate rose from 4.7% in 2007 to 10% in 2009, bankruptcy of Lehman Brothers one of the biggest investment bank in USA and USA suffered with liquidity crisis. This is one of the reasons government put a close monitor on borrowing pattern and rate.
From companies’ point of view, borrowing pattern & rate is indeed essential as they need it to determine the right product, formulate pricing and target the customers. In Indonesia, borrowing tend to increase a month or weeks prior to Idul Fitri as may people will go back to their home town and they tend to borrow money for new car or motor cycle or consumption such as new clothes, jewelries or even money for people in their village. These demands were corresponded nicely by finance companies, koperasi and pawn houses.
Finally, to conclude all observations, we can summarize that study of consumption, saving and borrowing are crucial for both governments and companies and each process are linked to the others and to have a comprehensive view, we have to review the overall trend and behavior.
Charlene 8B