I then did the family expenditure survey to help me work out the weighting of each product. I asked my parents how much money they spend on each of the products out of 100 dollars over a week. From this I determined the weighting of the good, which determined its importance. This helps to tell me how significant the price changes are for each product.
I also researched the local newspaper and the internet for articles related to price change and demand and supply. This would help me, along with the shopkeeper’s explanations, to explain why price changes. Finally, I’m to display my results on a series of tables and graphs. Hopefully, to show clear changes in the price of some of the products. I’ll have an index which will show how the percentage price changes from week to week in relation to the base week (week one). I’ll show the weighting of each good on a pie chart and the price changes on a bar chart.
The formulae that I’ll use for the tables are:
Most recent price – First price X 100
First Price
Current week – First week X 100
First week
Results:
This table shows the price index, change in index, prices for each week and product, the changes in price and the weighted price changes.
Change in index shows how prices have changes, if they’ve risen or fallen – inflated or deflated.
Weights show the importance of the good, it’s measured out of 1.
The weighted price change shows how important the price changes are in relation to the weightings.
This graph shows the changes in price for each item each week. For all of them there are no huge changes, but the price often varies. Long Beans, Papaya and Tomato had a constant price throughout the five weeks.
This table shows my Family Expenditure Survey. I conducted this to find out the importance of each good in my family’s spending. I asked how much money was spent on each item out of 100 dollars. From that I worked out the weighting.
This pie chart shows the weightings of each item in a percentage. It shows each items importance as a segment of the graph. Prawns and Star Fruit have no importance as they’re not bought by my family.
Analysis:
Throughout all the visits to the Gadong Market there were price changes or variations for most of the products. However, at the end there were only two products with an overall price change, Star Fruit and Carrots. For both of them their price increased by 50 cents.
This can be shown on a demand and supply graph for each.
These two graphs show an increase in price, demand could shift outwards or supply could shift inwards. A Demand increase (shifting outwards) would mean an extension of supply. A supply decrease (shifting inwards) would mean a contraction of demand. For both of these the equilibrium price would increase. But a demand increase would also increase the equilibrium quantity. A supply decrease would decrease the equilibrium quantity.
Demand Increase: Supply Decrease:
These two graphs show a fall in price, demand could shift inwards or supply could shift outwards. A demand decrease (shifting inwards) would mean a contraction of supply. A supply increase (shifting outwards) would mean an extension of demand. The equilibrium price would decrease in both these scenarios. But a fall in demand would also decrease the equilibrium quantity and a supply increase would increase it.
Demand Decrease: Supply Increase:
For most of the price changes, there were reasons given as to why the prices changed.
Price Increase:
- Bad crop, decrease in supply
- Fresher stock
- Goods imported
Price Decrease:
- Larger batch of stock, good harvest
- Larger catch, high tide
There are other possible factors that could affect demand and supply:
- changes in people’s incomes
- change in income taxes
- changes in population
- changes in the price of other goods
- changes in tastes and fashion
- advertising
- technical progress
- Changes in the cost of F.o.p.
The graph that shows the increase in price for Star Fruits and Carrots is the supply decrease graph. There was a fall in stock for both the items, there was a bad harvest.
From my research I’ve worked out that there was no inflation overall for all the products overall. In fact, there was deflation in the total price. In week four there was some inflation as the prices increased. But other than that, the other weeks showed deflation, a fall in price. For the weighted price change, the change in price of Star Fruit had no effect as my family doesn’t buy it. But Carrot’s change in price has some effect, 0.05 out of 1. Again, the weighting shows the importance of the item and the weighted price change shows how important the price change is to my family’s budget. The greater the weighting, the more important.
Conclusion – What I found out:
- Prices often change from week to week, but there’s almost always a reason for why they change. Factors related to demand and supply are often the causes of these price changes, there’s many aspects which contribute to these changes.
- The importance of each good varies too, affecting how important the change in price is of each product individually.
- Inflation can be measured with a price index to see how much the prices have changed over time. The weighted price change determines how significant these changes are to my family’s weekly budget for buying food.
Evaluation:
Overall, the coursework went very well. The results were good and to some degree, what I expected. However, there were some problems that were encountered during the market visits, etc. Some of the stall keepers didn’t know the reasons for the price change, or there was a language barrier – they didn’t speak English. Sometimes the stalls were closed or the stall keeper wasn’t there, this posed problems as we couldn’t maintain the consistency. We had to use alternate stalls to get the price or ask the next week we came. This may have altered results though. On a few occasions we couldn’t make the trip to the market as there were public holidays or school holidays. As a result, we didn’t go on as many trips as we would have liked. The last problem that I had was that the newspaper had very little or no information on demand and supply related articles. I had to use what I already knew from previous work, books and peers/teachers.
Glossary:
Inflation - an overall and sustained increase in the price of goods or services.
Weight – the importance of a good in relation to the monthly spending of my family
Demand – the want or willingness of consumers to buy goods and services
Supply – the amount of a good or service that producers are willing to produce
Price Index – the means or working out the percentage and price change from week to week
Family Expenditure Survey – the survey that I carried out on my family to work out the weightings of each good
Gadong Market – Brunei’s main local market. It mainly sells fish, vegetables and fruit
Bibliography:
- Dan Moynihan, Brian Titley. Economics: A Complete Course. Oxford University Press, 1993
- Borneo Bulletin
