Based on one of the Reuters article on 20th
February 2012, the author, John Stonestreet has stated that the trend of Barter
Trading has come back to the economy of Spain during the crisis of the
recession in Madrid which is headed by a retail store owner named Emanuela
Scena. In this current age is had been known that the economy of the world has
become rather unstable for most countries as when more companies are founded,
the amount of resources required by those companies will cause the overall
amount of resources in the world to drop.
Spain has
undergone an economical crisis. Spain at that moment was undergoing a recession
which greatly affected their economy. A recession is a massive drop in the
economic activity spread throughout the economy which often lasts for several
months. This is normally visibly seen in real GDP, real income, employment,
industrial productions and wholesale retail sales. This recession in Spain
caused many people to be unemployed and companies faced issues with releasing
people from their workforce to avoid bankruptcy. Spain before the recession had
already been experiencing a high rate of unemployment which then increased further
when the recession had occurred.
However
even with the recession, Emanuela Scena had been unaffected by the negativity
of the recession because the store that she runs is operated by a barter
system. Spain had previously been involved in barter trade several decades ago
but the trend had died down. Despite this, the recession had caused the idea of
barter trading to be re-adopted by the society. This barter system is a system
in which items are traded for items and agreed upon by both parties of the
trade. Recession does not affect this kind of trade because a recession only
affects transactions which involve using money. As an example, if a bag of rice
costs $5.00 before a recession, it could increase to $7.50 after a recession.
However if in a barter trade a bag of
rice is traded for a bag of sugar before a recession, after the recession the
barter trade would not be affected because the trade does not involve any money.
I for one would not want to spend an extra $2.50 just to eat so I as well would
participate in this barter system with Emenuela.
Initially,
the others people of Spain did not like the idea of trading for second hand
goods but after a short period of time they understood the necessity of the
trade. This in itself has shown the presence of Opportunity Cost among the
consumers of Spain. The idea of
opportunity cost is to attain more of an item that is desired while giving up
less of another depending on the wants and needs of a person while remaining inside
the range of the budget. When I went to
school as a student, I would normally have several choices of food to pick from
during recess. Food like fried rice, noodles, burger or if all do not appeal to
my senses I would stick to the traditional “nasi lemak” that is sold relatively
cheap in my cafeteria in school. Selecting between the first choice and an
alternate choice is a sign of opportunity cost where one product or good is
given up to make way for another as both cannot be chose at once. This same
decision making is shown by the people of Spain when they at first decided to
not be involved in the barter trade but later considered it a better
alternative compared to their conventional method of purchasing goods.
Moreover,
Production Possibility Frontier can also be seen in the article above. The
people of Spain are experiencing a recession which means that the prices of all
goods in the market have risen to considerable heights. However, instead of
refusing to go to the supermarket in order to purchase items they have decided
to involve themselves in trading their own items for points in Emanuela Scena’s
shop to be later exchanged for other items in the shop. Consumers of Spain have
decided that it is more efficient for them to trade goods and pay a small sum
of money in her shop rather than to go to a proper shopping complex and
purchase an item or equipment there for a much higher price. The efficiency of
PPF can be defined as achieved when we cannot produce more of one good without
producing less of another. In short, the people of Spain had decided to give up
purchasing first hand but expensive goods for second hand goods that are used
in a barter trade. I for one can be said as an inefficient student when
efficiency is taken into consideration. As a student I have had exams to attend
to while I was in school. Though these exams were not particularly hard it is
still advisable to study at least before the exams. However, even if I was
given a 3 hours gap between exams to study I would spend at most an hour on the
books. After that initial one hour I would join my friends to play around with
poker cards in class or I would just end up sleeping. This is an example of
inefficiency when you do not make the most of the resources that have been
given. Which in this case is study time.
By Daniel Ong
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