Cost Cutting


Refer to the article
http://www.boston.com/business/markets/articles/2008/02/20/wal_mart_gains_after_refocusing_on_cost_cutting/

____________________________________________________________________________________


Article Review

According to the article, Wal-Mart successfully lifted its profits after undertaking cost cutting measures. I agree that cost cutting can maximise profits since Total Revenue-Total Costs = Profits. However, there are limitations to the effectiveness of cost cutting depending on different circumstances.

This strategy may work for one individual company. But when every company does it, it may not work out.

Cost cutting not only reduces the cost of production but also reduces demand. When cost is cut, the income of employees being a factor of production, may be cut as well. When every company does this, generally there will be a fall in income, causing people to have less money to spend. Hence, consumers buy less and the hope for increase in demand evaporates. Cost cutting becomes self-defeating.

____________________________________________________________________________________

I shall end off with some JOKES ! If our imba teacher Mr Ho is unable to enlighten you why studying economics is important, perhaps i can ! Have a good laugh [[:


Reasons for Studying Economics
{Reference: www.etla.fi/pkm/Jokec.html}
1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. When you are in the unemployment line, at least you will know why you are there.
5. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
6. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
7. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.



Personally, i like number 3 the most. Thats all ! Thanks for reading [:

-IRENE the model pupil !