Economics 101

2 Minutes Business Article

Title: Economics 101

“In my considered opinion, salary is payment for goods delivered and it must conform to the law of supply and demand. If, therefore, the fixed salary is a violation of this law - as, for instance, when I see two engineers leaving college together and both equally well trained and efficient, and one getting forty thousand while the other only earns two thousand , or when lawyers and hussars, possessing no special qualifications, are appointed directors of banks with huge salaries - I can only conclude that their salaries are not fixed according to the law of supply and demand but simply by personal influence. And this is an abuse important in itself and having a deleterious effect on government service. ~ Anna Karenina

Running a business on sentiment will run the business down.

It is common sense in business to make sure your income always exceeds your expenses.

As simple as this sounds, there are people who are out of business now who never saw their liquidation coming. They didn't have a system that regulated demand and supply.

I've met people who don't like numbers, can't hire an accountant at their start-up level but are really passionate about business. They are usually in and out of business.
You must love numbers and always do little accounting as an entrepreneur to sustain your business.

Demand is the amount of products consumers are willing to buy per time.

Supply is the amount of goods or services a business is willing to provide per time.

You must run your business consistently based on these two laws. And regulate your expenses based on them as well if you must stay profitable in business.

Action Step: Become more interested in the cash-flow/financial statement of your business.

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