Nee Sern is...

really really sleepy

Thursday, June 12, 2008

A story about subsidy

I got this from here and apparently the story is not credited to any author.

Anyway, here goes the story, with some minor corrections to the grammar and to improve clarity. I think you know how you can compare this to the situation we face now.

The story about “subsidy”…

A man called Maha owns a farm which can produce 10 apples every day.

He has 5 workers to operate the farm. The six of them eat 1 apple daily and it is enough to keep them operating the farm normally.

The remaining 4 apples, Maha sells them at RM10 each and he earns RM40.

His expenses:
He uses RM25 to improve the farm operation and facilities.
He gives RM2.00 salary to each of his workers.

His profit:
He keeps the remaining RM5.00 as profit.

Day by day, the farm is well developed and all of the 5 workers are happy with the money they can save.

When Maha passed away, a new landlord, Abdul comes to continue the farm operation.

He says to the workers: “We need to improve the farm quality and redefine our way of thinking. From now on all of you need to pay RM1.00 for each apple you eat. It is very cheap as the price is RM10 each outside the farm.”

The workers have no choice but to pay RM1.00 for the apple they eat daily. Their earning decrease from RM2.00 to RM1.00 per person.

As usual, Abdul sells the 4 apples and he gets RM40.

His expenses:
He uses RM25 for farm improvement
He pays RM10 to his 5 workers.

His profit:
He gets RM5.00 as profit.
On top of that, he gets another RM5.00 from the apples that he sells to his workers.
In total, he gets RM10 as profit every day.

Soon, the apple price increases to RM20 each.

The new landlord gets a higher profit as he gets RM80 for the 4 apples he sells daily.

Then, he decides to give the farming improvement contract to his close friend, Samy.

Samy says:”Apple cost naik, improvement cost also misti naik.”

So, the farm improvement cost increases from RM25 to RM50.

In actual, the improvement only costs RM30.

The remaining RM20, Abdul and Samy share evenly among themselves.

Let’s calculate how much Abdul gets daily:

His revenue:

Selling 4 apples in the market = RM80
Selling 5 apples to his workers = RM5.00
Under table money from improvement cost = RM10.00
Total = RM95.00

His expenses:

Improvement cost = RM50
Salary to workers = RM10

Total Profit:
In total, Abdul gets RM35 daily compared to RM10 initially when he takes over the farm from Maha. His profit increases RM25 and the workers are still getting RM1.00 daily per person.

The greedy Abdul does not want to stop there.

One day, he says to his fellow workers: ”You see ah, the current market price for one apple is RM20 and you are only paying RM1.

See how lucky you are! I have to SUBSIDISE you RM19.00 for each of the apple you buy and total I need to SUBSIDISE RM95.00.

This will greatly burden the farm and we might get bankrupt if we continue like this.

In order to avoid bankruptcy, I need to increase the apple price that you buy from RM1.00 to RM1.50 and I will bear the remaining RM18.50 per apple as my subsidy to you all.”

So, greedy Abdul adds RM2.50 to his current profit and the number becomes RM37.50.

No comments: