Equilibrium Price (part three in pricing!)

Commitment FAIL!  At least there's no one here to hold me accountable..  I'd still better make up for it though.  Fun!  (really!)  By the way, I'm getting rid of the formal definitions in these blogs; hopefully you, the nonexistent viewer, won't be inconvenienced by it..  Anyway, here's the final post in the three-part pricing series, and it's the most important part, since we can actually see it in day-to-day terms!

Definition:  The equilibrium price is the intersection point between the Supply and Demand curves when you plot them on the same graph.  The way that translates in the real world is the actual price of whatever it is that we're analyzing with such complex mathematical tools (hopefully we can both agree that they're not really that complex).  When you think about it, it's essentially a compromise between a consumer, who wants everything to be incredibly cheap, and the producer, who wants to sell incredibly expensively.  If either party dominates, naturally one of them will lose, and that's bad for business!


MOAR:

Supply (pricing structures part 2!)

I've decided commit (GASP! (see left)) to adding a new definition every day to this blog, even though nobody reads it.  I suppose I'm working on synthesis and making sense (cents!  another pun!  Sorry..) now.  Anyway..  Time to rock this already very rocked party!

Formal Definition:  "The willingness and ability of producers to offer products for sale in a market"

My Definition:  Supply is basically Demand's arch-nemesis, since otherwise consumers would get all their stuff for next to nothing!  Ultimately it shows producer (or seller) behavior, by showing how much of a product they would produce at a given price.  Since selling a product at a higher price would give more net profit per item, the seller is more inclined to produce more of that item since it provides a better source of income.  It's a difficult thing to understand for non-sellers, so here's an example.

Demand (creative titles FTW!)

Okay, I'm going to take a small step into the perilous world of economics, because I HATE YOU.  Just kidding!  Really though, I'm going to write about economic theory vocabulary.  Warning, may contain graphic content (no pun intended (you know.. graph-ic?  (ahem))).  Oh, and rights to the image on the right belong to snorgtees.com.  Not like they're going to see, but..

Formal Definition: (makes long trek to economics binder, comes back with ripped clothing and a fish attempting to consume his left toe (yep)) "The desire to have a product, and the ability to pay for it".  That probably didn't help at all.  Should I just stop putting the formal definition in these?

My Definition:  I think that we can all agree that buying stuff at a lower price is better for us as consumers, right?  (If we can't, then you're beyond even my almighty power to be helped..)  Thus, demand, usually expressed graphically, is something economists and businesses use to show how many people will buy a product at a certain price; it helps them find how much you want something and what you'll pay for it.

MOAR STUFF: 

Dividends!!

Formal Definition: A share of the profits of the corporation paid out to stockholders (people who hold stock (click the word for a definition!))

My Definition!: While a share (or stock) in a company represents a fraction of the value of the company itself if you were to sell it, a dividend is a piece of the profits the company makes; given in proportion to the amount of stock you hold. Any dividends you get will stay with you until you gamble them away or spend them on lobster or whatnot. Think of it as a tip a waiter might get for service! (the drawing is based on the stock/pizza analogy (and yes, the yellow thing is supposed to be a pizza))

Extra facts:

• Not all public stock (or "common stock") is going to give out dividends, even if the company does make a profit. In order to get guaranteed dividends you would have to buy "preferred stock", which I can tell you is pretty hard to get ahold of as a small investor.
• Companies will give out dividends in order to make buying their stock seem like a better idea. You can usually assume that means the company has profit to spare, but also wants you to invest in them more and so get more funds.

Now that wasn't so hard, was it?

Stocks!

Let's start off with corporate structure vocabulary, because I just so happen to have a sheet of it!

Formal Definition: A share of ownership in a corporation.

My Definition (slightly longer..(but more fun!)): Think of a company as a pizza (yum!). The job of this company/pizza is to make money by improving itself, and usually to do that it requires some money. So in order to get that money, the president of the pizza might sell some pieces of the pizza to somebody like you. Wait, don't eat it! At any rate, now the pizza uses your money to add toppings and such in order to make it more attractive customers. But the slice that you have, rather than being eaten, will gain toppings as well. Your hope is that eventually the pizza will be worth more money, so that you can sell your slice to someone else and make a profit. And that's really a stock is; a small slice (or "share") of the company!

Ask questions in the comments, and I'll try to improve this as much as I can!

No, Don't Leave! I have something to say!!

Read the title!

The purpose of this blog is to create somewhat of a database of financial jargon for those who have no idea why a company would want to melt its assets (liquidifiy), or why they would want an investment account that leaks (DRiPs).

Logically, the reader of the jargon can come to two conclusions: the first being that whoever they are reading is completely out of their mind, or the second (the philosophy behind this blog) which is the fact that the reader has not yet learned the appropriate terminology to read the article.

Of course it's easier to assume the writer is wrong, but that usually leads to accumulation of debt or loss the money needed to pay the rent. (Let's avoid the scenario below)

So it's settled; this blog is going to tell you what on earth those economists are saying, and will hopefully prepare you for the impending (you know they are) financial crises. Astound your neighbours, amaze your friends, by knowing what the @#$% your bankers are saying behind your back (or more likely, to your face, hoping you won't know what it is).

So sit back and relax, this won't hurt! (much.. no really, I'll try to keep the bad puns at a minimum)