50%-60% price hike in June??!!

50%-60% price hike in June??!!

This is the article with that news yeah: Article in themalaysianreserve.com It was reported in Utusan Malaysia that prices of basic items in the country will likely see a hike between 50% and 60% after the implementation of the new RM1,500 minimum wage. Universiti Tun Abdul Razak economist Prof Emeritus Dr Barjoyai Bardai before the new minimum wage came into force, he said the prices of items have increased by 30% due to many factors among which include high demand as well as the conflict between Ukraine and Russia. Do read the report in full here: Article in themalaysianreserve.com

Worried if price will go up 50 percent?

Seriously and statistically, if prices move up 50 percent, majority of everyone will be in a financial distress. The reason is because majority could not suddenly earn additional 50 percent to cover for this sudden 50 percent price increase. Majority also does not usually save more than 50 percent of their income which meant that if prices move up by 50 percent, there’s no way they have enough extra money to face this price hike. This is also why this price increase of up to 50 percent may happen to some products but cannot be for everything in the market which we are buying.

Would it rise by 50 percent over a longer period of time?

Certainly it will and it shall and it has been demonstrated by prices of our favourite beverage… that property which our parents bought a long time ago… it has also been demonstrated all over the world and it has a name too. It’s called inflation. This is also why people say investment allows us to hedge against inflation. Else, whatever money we have this year is less than last year and the year before! Oh yeah, that’s why we struggle to earn more money with every passing year because if we did not have any salary increment, our life gets harder, financially speaking.

What could we do about it?

The only reason prices rise is also because people could afford it. I repeat in another way. The only reason why people allow prices to rise is because they could afford it. Simple fact of life. If someone produces a good or a service and NO ONE could afford the price, then the price would have to be lowered until it could find some demand for it. This is the world of Demand and Supply.

A very good example, if price of teh tarik is now beyond the reach of many or that it’s just too high versus making own cup of teh tarik at home, then people will stop patronising the restaurants just for a cup of teh tarik. They have no choices but to make at home. When majority does the same, the restaurant would have to readjust their prices; lower their profit margin to attract customers to come again. Then again… people may just prefer to pay extra 20 sen every year and then complaining to all their friends about the price increase… while sipping their cup of coffee.

The above is not just an example for teh tarik. In Economics 101, Demand and Supply will always be a force which will force the price to adjust itself. This is the same for a property in a less popular neighbourhood versus a popular neighbourhood. Most of the time, when times are good, prices increase faster in popular neighbourhoods and when times are slow, prices go down faster in less popular neighbourhoods. Demand is higher when everyone likes it more and demand is lower when everyone prefers to pay lower for it.

Happy understanding and happy earning more because inflation is not going to go away. We can at best, manage it.

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