The relationship between the oil monetary value and the rising prices is a really common issue in a state. Whenever the oil monetary value has any alterations, sure the rising prices will be affected and for Thailand, it is besides the same. Besides, oil monetary value is set in the universe market so, whenever there is a alteration, Thailand would besides necessitate to do a alteration to its oil monetary values. Recently, due to the costlier petroleum causes the retail fuel monetary values to increase. Therefore, Thailand authorities in order to cut down their load, they cut down their oil subsidies and increase the retail fuel monetary value. When the oil monetary value additions, will take to increase of monetary value of many merchandises. So, this will do rising prices in Thailand.
Discussion and Argument
When the oil monetary value additions, it will impact many type industries in Thailand, particularly for those industries that use oil as their input for their merchandise. The cost of production of companies such as transit cost will be addition or necessitate to pay more for their natural stuffs. When cost of production addition, companies may necessitate to cut down its production and cause aggregate supply to diminish. The short tally aggregate supply curve will switch to the left. In this instance, the aggregative demand will be larger than aggregate supply and causes a deficit in the economic system. When deficit happens, the monetary value degrees of goods will automatically increase and do cost-push rising prices to go on. If this status last for a long period of clip, it will do inflationary depression.
In add-on, companies may make non desire to cut down it productions even though its cost of production is increased. Companies may desire to stay its net income as cut down productions will cut down the net income every bit good. So, they may take to go through on those costs to the consumer by addition the monetary value of the goods and services and stop up with rising prices.
Besides, the position from the consumer should besides be considered. When the monetary value of the oil addition, the growing of consumers & A ; acirc ; ˆ™ existent income will cut down and consumers demand for goods and services will besides cut down. This means the ingestion of consumers will be reduced. As ingestion is the chief constituent of the aggregative demand, it will do the aggregative demand curve to switch left. When aggregative demand curve displacement left, say the monetary value degree should be cut down but due to rising prices, it can merely restrict those companies non to put a excessively high monetary value. Beyond that, companies may besides necessitate to reconsider their end product as the demand is growing in a slow rate. Furthermore, when ingestion lessening, the economic growing will diminish and take to depression if the high oil monetary value remain for a long period of clip.
Employees may besides bespeak for higher lower limit rewards as their disposable income is decrease due to the high oil monetary value. So, companies need to increase rewards in order to keep its production. Therefore, companies will go through on those costs to the consumers by increasing the monetary value of merchandises and services and eventually do rising prices to go on.
When there is rising prices, the demand for money will increase as goods and services are going expensive. So, in order to cover with the lifting oil monetary value that causes rising prices, Thailand cardinal bank could increase the price reduction rate so that the money supply in the market will be reduced. When money demand is higher than money supply, involvement rate will increase. Interest rate addition means that the cost of borrowing will besides increase. People would wish to keep their money instead than borrow money to put. Therefore, when investing lessening it will do the aggregative demand to diminish and aggregate demand curve will switch to the left. At the same clip, monetary value degree will be decreased. Although the monetary value degree is been reduced, it seem to be non really effectual because the sum end product will be reduced as good. A lessening in sum end product will slower down the economic growing and a rise in unemployment would be seen. Companies start to recognize that they do non hold to bring forth so much goods and services, so they will cut down their labour force and at the same clip the ability of employees to inquire for higher wage will be reduced. Indeed if the slow economic growing becomes a depression, the demand for oil may cut down and impact the international oil monetary value.
Oil monetary value has a strong relationship with rising prices for many states included Thailand as oil monetary value additions, rising prices will go on at the same clip. It is difficult for Thailand to ever keep it retail fuel monetary value as the international oil monetary value is altering all the clip and it will besides be a load to the state.
Besides, the addition of oil monetary value affects both manufacturers and consumers. For manufacturers, their cost of production will increase and do them to increase the monetary value of goods and services. At the same clip, disbursement of consumers may cut down to restrict the impact of rising prices as aggregative demand lessening, monetary value degree will besides cut down.
Appropriate pecuniary policy may be implementing in order to cover with the oil monetary value and rising prices. Addition in involvement rate can cut down the consumer disbursement so that supply will be more than demand and monetary value degree will diminish. International oil monetary value could be affected if there is depression as demand for oil will diminish.