Price hikes and its relatability in economies

Price fluctuations depend upon the simple economics principle which is “demand and supply” of commodities or services and artificial pressures. Demand and supply mechanism works on the availability of products and services and its quality as well if it’s the scarce price would definitely increase. 

A balanced approach of price control depends upon basic economics and international market factors, government policies, and best practices. Developing economies will always be impacted due to international events or inflationary pressure, there could be demand push price hikes, supply push price falls and other local market tactics to preserve commodities in stock and create artificial price hikes or unrealistic fluctuations to dismantle government’s policies. 

Now, see this maxim in different scenarios;

Price hikes of household commodities

Increase in prices of daily consumable items related to its production and supply, if commodities are produced in homeland, then definitely prices would be economical or if the government has subsidized their cost of production, then it’s very reasonable for example in agricultural lands price of rice, wheats, vegetables or fruits and dairy products should be very economical because that’s homeland productions. But they are imported items then prices would increase due to taxes and duties. 

Prices of oil and gas

Prices of fuel and oil and gas depend upon three factors, one is cost of production and other is demand and supply mechanism in international markets and third one economic war between countries that produce oil and gas. Oil wars were one of the core elements in past to weak economies of developed countries and developing countries were the collateral damages, therefore, they sought alternatives and support from other developing countries like China, Iran, and other gulf countries to provide oil at reasonable prices. 

Prices of resources

Price mechanism of resources if one of the toughest mechanisms to understand, human resource management and wage or salaries are critical and crucial subject and depends upon different factors, one is a skilled workforce, second scarcity of resources or indispensability, third quota system and national or geographical factors where resources are working and its demand and supply.   

In the above three scenarios, one thing is common price mechanism is played by basic organic factors and big giants in the market as well. Availability of alternatives is another dominant factor in setting prices of rare or expensive commodities, for example, price of oil if raised by their producers but there are alternatives available for example gas and coals which equally produces energies, they can balance the prices and need of fuel in the market. Today, in developing markets especially Pakistan have pretty much balanced their price mechanism of all commodities including oil and gas even though there was internal inflationary pressure and international pressure to raise prices for example world bank or IMF but due to well-balanced strategies and good foreign policy they have kept it managed and in control. 

Now, the global economy is moving towards recovery phase after Covid 19 phase and it’s very hopeful that with subsidized policies, availability of alternative resources like coal and gas and introduction of electric vehicles will be very helpful in maintaining prices in control even though there’s fear of increase in taxes globally.