Archive for the ‘Economics’ Category

Start with Acceptable Trading Capital   no comments

Posted at 4:31 pm in Trading Capital

Many investors start with less than $10,000 in their trading accounts. How- ever, it is important to realize that the less you have in your account, the more cautious you have to be. Perhaps the toughest problem is to establish a sufficient capital base to invest effectively. If you begin investing or trading with very little capital, you will assure yourself of failure. Making money in the markets requires a learning curve, and incurring loss is part of the trading process. When it comes to trading, “you have to pay to play.” You don’t need to be a millionaire, but trading does require a certain amount of capital to get started. In many cases, the brokerage firm you choose will determine how much is required to put you in the game. How- ever, no matter how much you begin with, it is a good idea to start out by trading conservatively. If you invest smartly, you can make very good returns and your financial goals will be realized.

Written by admin on December 9th, 2009

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Myths of economics   no comments

Posted at 4:28 pm in Economics

This statement contains a grain of truth. A profit- seeking entrepreneur will not undertake a project knowing the costs can’t be covered. However, the statement fails to emphasize (1)the time dimension of the production process and (2) the uncertainty associated with business decisions. The production process takes time. Raw materials must be purchased, employees hired, and plants equipped. Retailers must contract with suppliers. As these decisions are made costs result. Many of the firm’s costs of production are incurred long before its product is ready for marketing.
Even a good business maker is not always able to predict the future because market conditions can change quickly and unexpectedly. At the time the product is ready for sale, buyers might be unwilling to pay a price that will cover the seller’s past costs of production. These past costs, however, are now sunk costs and no longer relevant. Decisions must now be made on the basis of the firm’s current cost and revenues.
Should a grocer refuse to sell oranges that are about to spoil because their wholesale cost cannot be covered? The grocer’s current opportunity cost of selling the or angles at this point is nearly zero. The alternative would be to throw them In the garbage next week. Almost any price, even one far below past costs, will be the oranges spoil.
Consider another example. Suppose a couple who owns a house  plans to relocate temporarily. Should they refuse to rent the house they‘re m n g out of for $500 (if this is the best offer available) because their monthly house payment IS $8007 Of course not. The house payment will go on, regardless of Wether or not they rent the house. If the homeowners can cover their opportunity costs (perhaps wear and tear plus a $60 monthly fee for a property management service), they will gain by renting rather  leaving the house vacant.
Past mistakes provide useful lessons for the future. but they cannot be reversed. Bygones are bygones. Even if they resulted in business loss. There is no need to fret overspilt milk, burnt toast, or yesterday’s business losses.

Written by admin on December 1st, 2009

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