Don’t you just hate it when you buy that new jacket or cell phone and the price goes down after you’ve paid full price for it? “I should have waited ” you think. If you knew how the economy worked, you would have known when to hold out for the lower price. Read on if you want to gain the knowledge of the economic system and take the step into becoming a well-rounded individual in today’s model society. If not, put this down and continue eating your Doritos.

Say you wanted to open up a small business selling Donald Trump wigs. You have quiet a few things to consider. How many employees do you hire? Where will you get the wigs? How much will you sell them for? Would a bank loan you the money you need?

Assuming Donald Trump wigs were in high demand, you’d need to buy your merchandise. This is what economic experts call supply and demand. The higher the demand, the better the business for you. People want to buy the item so badly they’re willing to pay a higher price for it. If no one wanted your product as much as before, lowering the price may influence them to buy it. (Remember the new jacket and cell phone from earlier?)

Unless you had a Donald Trump wig machine hidden in your basement, you’d buy them from a factory or manufacture. The factory makes your products, selling them to you at what is called the retail price. To gain a profit, you’d have to sell the products at a higher price to your customers. The more reasonable and convenient the price, the more people will buy, making you an instant hit.

But wait--the success is too much People have begun sleeping outside your door waiting to buy your product and threatening to kill your pets if you don’t sell them a Donald Trump wig and you can’t keep up with the demand.

This is when you’d consider hiring more employees to help out and expanding your business, an indicator that employment ratings are up. With more employees hired, the bigger your business becomes, meaning more customers and importantly, more money. The surplus of money is used to increase your employees wages, buy more products, and improving your business. With the bonus in your employee’s paycheck, he may finally be able to buy his daughter that hamster she’s always wanted. Oh, and pay the bills, car insurance, government taxes, rent, food, etc.

Don’t think the success stops there. Since so many wigs are being sold, its important to keep up with the customers demand and keep buying more from the factory. You can consider raising the price of your product to gain more profit. The factory’s business flourishes and they experience the same success you do.

How, you may ask? The economy runs on a cycle, just like a domino effect. If your business had gone sour, the opposite would have happened. Lets say demand is so low that you’re forced to sell your products at the lowest price possible just to get customers. You barely have money to pay your employees and they in turn can’t pay their rent or support their family and that poor girl never gets her hamster. There’s no reason to buy as much as before from the factory, so the factory loses business too.

On a grander scale, this is happening to our economy today. Unfortunately, those stock corporations you keep hearing about in the news have lost a lot of money and affected many other businesses along with it.

The banks lent out money to people who couldn’t pay it back. The banks sold the bad loans to Wall Street, who also wont get their money back. Some insurance companies guaranteed the value of the over priced homes and now they went under (like AIG). No one regulated it.
Banks are in trouble so they are not lending money out much money and our country is very dependent on these loans. People use them to start companies, companies use them to pay the ongoing costs of operations, people use them to buy cars, people use them to buy houses, students use them to attend school.

So less of all that will be happening. There will be less money to go around. Cutting back on costs for companies means letting people go, for people it means losing jobs, difficulty in receiving loans, and they will be much more expensive if you do get them. So things that require loans from banks will be decreasing. No Donald Trump wig store for you, unfortunately.

Also, the 700-Billion Bailout ideally will give money to banks so that they start making loans again like they used to. The 700 billion is a lot of money that the U.S government will give to the banks( these are the people who basically screwed up our economy and we are giving them money). The US will borrow money internationally, and over the years we will be paying it along with interest through increased taxes.

Unless you were sleeping or distracted by a kid with slimy hair sitting in front of you in Social Studies, you should be familiar with the Great Depression. An economic recession is part of a cycle--it's happened before and will happen again.