How pricing works ? The Reality of eIreland.
Day 882, 12:37
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Published in Ireland 
•
by
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by Paschoall
Hello dear eIrish fellas ! how are you doing today ?
To begin with I'd like to say that I was almost finished with this article, when I suddenly deleted it by mistake =,(
Lost something like 2 hours of work =,(
Secondly I'd like to THANK all you guys to voted, comented and subscribed ! You guys made my day much happier
What I'm writing about is pretty much basics micro and macroeconomics along with a bit of International Trade. I understand some people already got quite lots of knowledge about this subjects, so I call for your help : coment, point out where I missed something, compliment, cry, write something about the same subject proving your point ... This is the only way we can all grow our knowledge about this thing I'm trying to do here.
My main goal right here is to apply (or try to) the knowledge I got about economy in eRepublic, so hopefully my dear eIrish conrades will agree with it and we will all make eIreland a better eCountry as the days passes by !!! o7 - It would be awesome too if together we come up with something new. I'd say that'd be even better !!!
> This is the way I found to expose what I think government should do (that's why I'm running for congress) to make eIreland a better place for all of us
Right now, I will only be only looking at the current version we find ourselfs because it's the one that matters right now. Once v2 is lauched, I'll change this things to fit the new production module.
So... class, let's get started (hehehehe):
1) Let's state some "absolute truths" or some may call : unquestionable truths.
- Like I said in last article, in eRepublic, all things we consume are scarce. This things are : IEP, Gold, grains, diamonds, oil, iron, wood, weapons, gifts, food, moving tickets, houses, hospitals, defense systems and Labour (People).
- I will not analyse Hospitals and Defense systems as they're rarelly variable thru hands of citizens.
- I work with a fix numbers of citizens (they don't vary over time). We all know that the more citizens, OF COURSE we'll have more $$$ in our economy. So increasing population is always a very nice way to develop a eCountry (later on, if I find some nice materials about this, I'll write something about it).
- All raw materials consume during they're production: IEP/gold and labour. I'll call this sector the primary industry. This sector's demand depends on the demand for the products of the secondary industry.
- Food, Gifts, Weapons, Houses, Moving Tickets compose the secondary industry. Weapons, Houses and Moving Tickets are not a primarelly need in eRepublic, althou they are very well desired. BUT this 3 itens are usually the ones people CUT OFF they're budgets once they start to run low on money. Now let's take a loot at food and gifts.
- Food and Gifts are similar substitutes of each other. When food prices are too high, people tend to buy more gifts and when gift prices are too high, people eat more food. Now food is much more desired than gifts once they trigger the wellness from houses too (you only get wellness from houses if you do eat some food). So the demand for both this itens tend to be pretty much steady and grow along with the population. (you can check this article written by dSoKre about Cheapest way to keep your wellness at 100, to understand how this tradeoff amongst this 2 products work). Quick example:
so
- SOOO, overall, what I have to say is: doesn't matter how expensive they get, food and gifts always will be demanded, and thus making grain and diamonds the most important eResources. If food and gifts have they're prices increased, than salary should be increased accordingly, if the oposite happens, than salary should be drecreased. Pretty simple, huh ?
2) eIreland reality
> With all my godly powers, I stoped time and looked at this eEconomy:
- Arround 1600 citizens (I found no way to count deployed troops... so they're not counted here)
- 6 regions.
- Most population is in 3 regions given the Q5 hospitals: Northeast, Northwest and Cork and Kerry.
- Dublin, Cork, Northwest, Shannon and Southeast have medium grain productivity. Northeast has got medium iron productivity.
- Majorly skill of the population is in manufactoring (arround 64
- Almost 3/2 of our population are Privates and arround 1% are Field Marshalls.
- Almost 45% are "childs".
- Together Dying (17
> Public:
-Hospitals - 1 of them is Q1 (Shannon), 1 is Q2 (Southeast), 1 is Q4 (Dublin), 3 are Q5 (Cork, Northwest and Northeast).
-Defense System - Only Dublin has got a Q1.
INDUSTRY - We have, today (day 882) 254 industries in eIreland.
> 184 MANUFACTURING industries: 125 of them are Q1, 36 are Q2, 13 are Q3, 5 are Q4, 5 are Q5.
- Food: Total of 56 - 31 of them are Q1, 15 are Q2, 5 are Q3, 3 are Q4, 2 are Q5.
- Gifts: Total of 21 - 15 of them are Q1, 5 are Q2, 1 is Q3.
- Weapons: Total of 85 - 57 of them are Q1, 16 are Q2, 7 are Q3, 2 are Q4, 3 are Q5.
- Moving Tickets: Total of 22. All of them are Q1.
> 38 LAND industries: 24 of them are Q1, 10 are Q2, 4 are Q3.
- Grain: Total of 19 - 14 of them are Q1, 4 are Q2, 1 is Q3.
- Diamond: Total of 1. It's a Q1 company.
- Iron: Total of 17 - 8 of them are Q1, 6 are Q2, 3 are Q3.
- Oil: Total of ZERO.
- Wood: Total of 1. It's a Q1 company.
> 32 CONSTRUCTION industries: 16 of them are Q1, 9 are Q2, 4 are Q3, 1 is Q4, 2 are Q5.
- House: Total of 24 - 13 of them are Q1, 5 are Q2, 4 are Q3, 1 is Q4, 1 is Q5.
- Hospital: Total of 5 - 2 of them is Q1, 2 is Q2, 1 is Q5.
- Defense system: Total of 3 - 1 of them is Q1, 2 are Q2.
* used eGovStats for most stats ...
3) Finally the Pricing !!!
- People with economy knowledge, this may sound pretty simple to you. So don't get to stuck in this part.
(sorry, this was the best i could find ...)
GDP line restriction is steady. We won't change our GDP. I'll show you how do we get to a bigger satisfaction curve using the same amout of money:
As you can see, we have 2 products, X and Y. As an example, we can use X = Food and Y = Gifts.
The perfect spot of maximizating this economy's satisfaction is given at point A before there are any change in the prices ... but SUDDENLY prices of food drop down ( Px2 < Px1). What happens ?
Remember that little indiference curve ? it was touching the GDP restriction at A. Now it moves to point C, as the GDP restriction line moved a little further to the right. so you ask:
"No no no Paschoal, GDP didn't change, the price of X changed (price of food decreased)..."
and I say: "youre right!!!"
Using the same amout of money I was using before to buy food and gifts, now I can buy MORE STUFF (was in U1 curve, went to a higher one: U2). I'll buy more food (of course the price decreased...) but I'll also buy more gifts !!! even thou the price of gifts did not change, I'll have more spare money to buy it. This means I'll be happier, I'll buy more. I'll have the feeling I got richer. But nanana, I did not.
This simple (I mean VERY SIMPLE) example illustrates a bit what happens when some price decreases. The opposite happens when price increases: the indiference curve retreats and people will buy less stuff with the same amount of money.
*** You can use this example to explain Gifts x Food or Weapons x Moving tickets or Grain x Iron, but NOT to explain Food (or gifts) x Iron for example, because the price effects them differently. For instance if X = iron and Y= food, imagine a decrease price of iron. Does that means I'll eat more food ? not nescessarelly. Another Example: X = grain and Y = moving tickets . I won't be buying more moving tickets if the price of grain drops ...
Can you guys see how the price of food and gifts effect the prices of all the other things in eEconomy ? Try yourself. Put either food or gifts in the X and any other product you want in Y. If X decreases, it's 100% sure that the other products will have a increased demand. (I dare to say that in eRepublic, usually, when prices of food and gifts vary the products that are more affected are Weapons and Houses). Why so ? Because food and gifts are the "cost of labour".
>If the price I'll pay to EAT (or exchange gifts) is ABOVE the usual market salary, than salary has got to be increased or food (and gifts) have got to get cheaper. This is the cost of labour, it's how much the employer has got to pay to each employee ... in the long term they TEND to be equal.
" Where are you getting at silly Paschoal?" , here it is: Take a look at what could possible decrease (or increase) the price of a product :
- Value Added Tax (VAT)* (A tax paid every time something is purchased from the market)
*VAT is not added to the price of raw materials.
- Income Taxes (is deducted when a General manager collects money from a company's account. It is also deducted from wages received by employees)
- Import tax (increases the selling price of items at the marketplace when the company selling the item is outside of the country)
- Demand. If too high, prices rise. If yoo low, prices low.
- Cost of inputs: raw materials (and also the productivity of it) and LABOUR (and also it's skill...)
- Government giving out subsidies or overtaxing.
- as soon as I keep remembering more I'll edit (help me out people!!!)
4) Conclusion (it was about time ...)
If in Congress (and I reeeeally hope I'll make it there with you guys supporting me) I'll try to:
- Get us more GIFTs companies.
- Work out the taxes in a way that we decrease the cost of our labour
- Still on taxes: start working with importation of raw materials. This would also take a study because I'll look for a country that does so in the most benefitial way for US, of course. Maybe motivate and possibly finance some of our dear Irish people to create companies in high productivity raw material areas focusing on exporting to eIreland.
- Work on top of creating specialized sectors in our economy. We gotta develop them. Make'em grow ... export !!! Maybe have a exportation licence finantial policy ...
WELLL ... This took a lot of freaking work ! I hope you guys Vote this up and Subscribe to The Freakonomic !
PEEEACE, Paschoal
> Vote for Paschoall in Congress (Shannon) !!!
PS: I am very very very willing to learn more with you guys, so please, if you agree with something, than say it out loud. And if you don't agree, please state your point
PS ² : I'd love if you could spread the link of The Freakonomic arround ... I know you guys have the powerrrr !!!
To begin with I'd like to say that I was almost finished with this article, when I suddenly deleted it by mistake =,(
Lost something like 2 hours of work =,(
Secondly I'd like to THANK all you guys to voted, comented and subscribed ! You guys made my day much happier
🙂
What I'm writing about is pretty much basics micro and macroeconomics along with a bit of International Trade. I understand some people already got quite lots of knowledge about this subjects, so I call for your help : coment, point out where I missed something, compliment, cry, write something about the same subject proving your point ... This is the only way we can all grow our knowledge about this thing I'm trying to do here.
My main goal right here is to apply (or try to) the knowledge I got about economy in eRepublic, so hopefully my dear eIrish conrades will agree with it and we will all make eIreland a better eCountry as the days passes by !!! o7 - It would be awesome too if together we come up with something new. I'd say that'd be even better !!!
> This is the way I found to expose what I think government should do (that's why I'm running for congress) to make eIreland a better place for all of us
🙂
Right now, I will only be only looking at the current version we find ourselfs because it's the one that matters right now. Once v2 is lauched, I'll change this things to fit the new production module.
So... class, let's get started (hehehehe):
1) Let's state some "absolute truths" or some may call : unquestionable truths.
- Like I said in last article, in eRepublic, all things we consume are scarce. This things are : IEP, Gold, grains, diamonds, oil, iron, wood, weapons, gifts, food, moving tickets, houses, hospitals, defense systems and Labour (People).
- I will not analyse Hospitals and Defense systems as they're rarelly variable thru hands of citizens.
- I work with a fix numbers of citizens (they don't vary over time). We all know that the more citizens, OF COURSE we'll have more $$$ in our economy. So increasing population is always a very nice way to develop a eCountry (later on, if I find some nice materials about this, I'll write something about it).
- All raw materials consume during they're production: IEP/gold and labour. I'll call this sector the primary industry. This sector's demand depends on the demand for the products of the secondary industry.
- Food, Gifts, Weapons, Houses, Moving Tickets compose the secondary industry. Weapons, Houses and Moving Tickets are not a primarelly need in eRepublic, althou they are very well desired. BUT this 3 itens are usually the ones people CUT OFF they're budgets once they start to run low on money. Now let's take a loot at food and gifts.
- Food and Gifts are similar substitutes of each other. When food prices are too high, people tend to buy more gifts and when gift prices are too high, people eat more food. Now food is much more desired than gifts once they trigger the wellness from houses too (you only get wellness from houses if you do eat some food). So the demand for both this itens tend to be pretty much steady and grow along with the population. (you can check this article written by dSoKre about Cheapest way to keep your wellness at 100, to understand how this tradeoff amongst this 2 products work). Quick example:
so
- SOOO, overall, what I have to say is: doesn't matter how expensive they get, food and gifts always will be demanded, and thus making grain and diamonds the most important eResources. If food and gifts have they're prices increased, than salary should be increased accordingly, if the oposite happens, than salary should be drecreased. Pretty simple, huh ?
2) eIreland reality
> With all my godly powers, I stoped time and looked at this eEconomy:
- Arround 1600 citizens (I found no way to count deployed troops... so they're not counted here)
- 6 regions.
- Most population is in 3 regions given the Q5 hospitals: Northeast, Northwest and Cork and Kerry.
- Dublin, Cork, Northwest, Shannon and Southeast have medium grain productivity. Northeast has got medium iron productivity.
- Majorly skill of the population is in manufactoring (arround 64
😵than construction (arround 22
😵and finally Land (arround 14
😵.
- Almost 3/2 of our population are Privates and arround 1% are Field Marshalls.
- Almost 45% are "childs".
- Together Dying (17
😵and Unhealthy (22
😵sums up arround 39% of our population. So pretty much we have something arround 1000 active Irish players + the doployed ones ...
> Public:
-Hospitals - 1 of them is Q1 (Shannon), 1 is Q2 (Southeast), 1 is Q4 (Dublin), 3 are Q5 (Cork, Northwest and Northeast).
-Defense System - Only Dublin has got a Q1.
INDUSTRY - We have, today (day 882) 254 industries in eIreland.
> 184 MANUFACTURING industries: 125 of them are Q1, 36 are Q2, 13 are Q3, 5 are Q4, 5 are Q5.
- Food: Total of 56 - 31 of them are Q1, 15 are Q2, 5 are Q3, 3 are Q4, 2 are Q5.
- Gifts: Total of 21 - 15 of them are Q1, 5 are Q2, 1 is Q3.
- Weapons: Total of 85 - 57 of them are Q1, 16 are Q2, 7 are Q3, 2 are Q4, 3 are Q5.
- Moving Tickets: Total of 22. All of them are Q1.
> 38 LAND industries: 24 of them are Q1, 10 are Q2, 4 are Q3.
- Grain: Total of 19 - 14 of them are Q1, 4 are Q2, 1 is Q3.
- Diamond: Total of 1. It's a Q1 company.
- Iron: Total of 17 - 8 of them are Q1, 6 are Q2, 3 are Q3.
- Oil: Total of ZERO.
- Wood: Total of 1. It's a Q1 company.
> 32 CONSTRUCTION industries: 16 of them are Q1, 9 are Q2, 4 are Q3, 1 is Q4, 2 are Q5.
- House: Total of 24 - 13 of them are Q1, 5 are Q2, 4 are Q3, 1 is Q4, 1 is Q5.
- Hospital: Total of 5 - 2 of them is Q1, 2 is Q2, 1 is Q5.
- Defense system: Total of 3 - 1 of them is Q1, 2 are Q2.
* used eGovStats for most stats ...
3) Finally the Pricing !!!
- People with economy knowledge, this may sound pretty simple to you. So don't get to stuck in this part.
(sorry, this was the best i could find ...)
GDP line restriction is steady. We won't change our GDP. I'll show you how do we get to a bigger satisfaction curve using the same amout of money:
As you can see, we have 2 products, X and Y. As an example, we can use X = Food and Y = Gifts.
The perfect spot of maximizating this economy's satisfaction is given at point A before there are any change in the prices ... but SUDDENLY prices of food drop down ( Px2 < Px1). What happens ?
Remember that little indiference curve ? it was touching the GDP restriction at A. Now it moves to point C, as the GDP restriction line moved a little further to the right. so you ask:
"No no no Paschoal, GDP didn't change, the price of X changed (price of food decreased)..."
and I say: "youre right!!!"
Using the same amout of money I was using before to buy food and gifts, now I can buy MORE STUFF (was in U1 curve, went to a higher one: U2). I'll buy more food (of course the price decreased...) but I'll also buy more gifts !!! even thou the price of gifts did not change, I'll have more spare money to buy it. This means I'll be happier, I'll buy more. I'll have the feeling I got richer. But nanana, I did not.
This simple (I mean VERY SIMPLE) example illustrates a bit what happens when some price decreases. The opposite happens when price increases: the indiference curve retreats and people will buy less stuff with the same amount of money.
*** You can use this example to explain Gifts x Food or Weapons x Moving tickets or Grain x Iron, but NOT to explain Food (or gifts) x Iron for example, because the price effects them differently. For instance if X = iron and Y= food, imagine a decrease price of iron. Does that means I'll eat more food ? not nescessarelly. Another Example: X = grain and Y = moving tickets . I won't be buying more moving tickets if the price of grain drops ...
Can you guys see how the price of food and gifts effect the prices of all the other things in eEconomy ? Try yourself. Put either food or gifts in the X and any other product you want in Y. If X decreases, it's 100% sure that the other products will have a increased demand. (I dare to say that in eRepublic, usually, when prices of food and gifts vary the products that are more affected are Weapons and Houses). Why so ? Because food and gifts are the "cost of labour".
>If the price I'll pay to EAT (or exchange gifts) is ABOVE the usual market salary, than salary has got to be increased or food (and gifts) have got to get cheaper. This is the cost of labour, it's how much the employer has got to pay to each employee ... in the long term they TEND to be equal.
" Where are you getting at silly Paschoal?" , here it is: Take a look at what could possible decrease (or increase) the price of a product :
- Value Added Tax (VAT)* (A tax paid every time something is purchased from the market)
*VAT is not added to the price of raw materials.
- Income Taxes (is deducted when a General manager collects money from a company's account. It is also deducted from wages received by employees)
- Import tax (increases the selling price of items at the marketplace when the company selling the item is outside of the country)
- Demand. If too high, prices rise. If yoo low, prices low.
- Cost of inputs: raw materials (and also the productivity of it) and LABOUR (and also it's skill...)
- Government giving out subsidies or overtaxing.
- as soon as I keep remembering more I'll edit (help me out people!!!)
4) Conclusion (it was about time ...)
If in Congress (and I reeeeally hope I'll make it there with you guys supporting me) I'll try to:
- Get us more GIFTs companies.
- Work out the taxes in a way that we decrease the cost of our labour
- Still on taxes: start working with importation of raw materials. This would also take a study because I'll look for a country that does so in the most benefitial way for US, of course. Maybe motivate and possibly finance some of our dear Irish people to create companies in high productivity raw material areas focusing on exporting to eIreland.
- Work on top of creating specialized sectors in our economy. We gotta develop them. Make'em grow ... export !!! Maybe have a exportation licence finantial policy ...
WELLL ... This took a lot of freaking work ! I hope you guys Vote this up and Subscribe to The Freakonomic !
PEEEACE, Paschoal
🙂
> Vote for Paschoall in Congress (Shannon) !!!
PS: I am very very very willing to learn more with you guys, so please, if you agree with something, than say it out loud. And if you don't agree, please state your point
🙂
PS ² : I'd love if you could spread the link of The Freakonomic arround ... I know you guys have the powerrrr !!!
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Comments
Nice,,Voted..i'll be shouting it out...
I think you have a great many things wrong here^ havnt time to point them out now , will pm u wen i get a chance
just to let u know , we have absolutely NOWHERE near 1000 active players, Nowhwere near even half that
IEP/Gold and Labour are factors of production.
Yes, invest in gift companys, that in a few weeks when v2 hits, wont be useable 😃
If we ignore that alot of them images are taken from articles around the world, aswell as the information in them, probably one of the better cut and pastes we have seen in the last few days.
SweetDrinker did a census a few months ago, back when the overlal population was around 1500, I believe. he found that there were only between 650-750 active citizens in eIreland. So basically, one can always use a simple 50% reduction of the stated population to get the actual active population.
Also, you say this:
"If food and gifts have they're prices increased, than salary should be increased accordingly..."
I somewhat disagree with this. Food and gift prices are primarily affected by Raw Materials prices. Yes, if a company raises prices independent from RM prices, salary can be raised, however, in general, competition tends to keep prices closer to breakeven.
Bravo, great work for someone who's being playing less than 2 months, and you'rethinking in the right way.
you need to get working on v2 though.
Gifts are being removed, and diamonds are turning to titanium. houses and hospitals will expire and customisation becomes more important (which I think will increase the chances to trade profitably)
btw, hope the comments that follow are more appreciative, e-Ireland can be a tough place some times🙁
Greatly written!
Love your Energy and work, please keep it up. Suggestion instead of tring to apply real world macro economics try to understand one aspect of economics in this game and write about that. The economics of this game are diffrent then real world.
Thanks for your time guys !
All your commentaries are really welcome and are surelly helping me out 🙂
Even critics are welcome, the only one I don't quite appreciate is 5n4keyes'. Now seriously, just because you got more experience than me, that is no reason to mock me or to call me a thief. All the info I took that wasn't mine is written where does it come from. Even the odd looking graph, I used f#@king paint brush to do that -.-
Your more than welcome to add me up on skype, msn ... take me email, my facebook to chat with me about all I've ever written, than you can make up your mind about me. What do you say big boy ?
For all the others who are at least polite, thanks for your patience to read all this things 🙂
Peace
@moomoohead
I couldn't agree more.
@Paschoall
According to your utility maximization model, decreasing prices lead to a better utilization but these decreased prices must be compensated somehow if model is static either by government or workers.
Prices can decrease in three ways.
1 - Raw material cost decrease
2 - Labour cost decrease (Direct)
3 - Skill increase (Indirect)
1 - Private or state-run companies in high resource areas may help, but their effectivity is a matter of debate as there is no customs barrier in raw material import already.
2 - Especially for low skilled jobs, wages are rigid on the down. And also in such closed models involving almost no export (like Ireland) , purchasing power is primarily supplied by wages and golds from non-economical events (level 6, hard worker, buy gold etc.).
3- Increased skills result in more production which means lower unit cost. This is the (in fact) easiest and most healthy way but it takes time.
As I stated before (in your previous article), according to productivity formula for manufacturers (http://wiki.erepublik.com/index.php/Productivity_formula) is,
W = 1/2 * A * B * C * D * E * F
where only A (= skill multiplier) changes productivity and before v2 comes it is homogeneous no matter what you produce. So until v2 comes, there is no need for such specialization.
And for last, please keep in mind that most companies do not pay income tax as general managers usually prefer to use monetary market to transfer funds instead of collecting to avoid tax, so income tax is usually paid by workers only.
We have 1 wood and 1 diamond, wich idiots were that XD
I like your article, I have some knowledge of the economics, and by coincidence you were talking about the part I had to study for last exams
But I think part three may be a little bit too complicated explained for people who have no knowledge of economics