Monday, January 1, 2018

Why should I pay extrafacultaprecium?

In fact, I'm forced to coin a new term here to explain a common but unbothered phenomenon in our society. However, please consider my economical ignorance, in case this is already known and defined by someone.

What is extrafacultaprecium? Etymologically speaking, extrafacultaprecium ('ex prodigis usus resource sumptus est') is nothing but the cost from extravagant usage of resource. In simple terms, it's the extra cost incurred for a resource due to somebody's extravagant usage of it.

To understand this term better, we need to brush up our memory of fundamental economic concepts and their relation: supply, scarcity, demand and cost. This terminology can be defined as below (may not be economically accurate though).

Supply is the total amount of a specific good or service (referred here to resource) that is available to consumers. Scarcity, on the contrary, is the condition that exists when there are not enough resources to satisfy all the wants of individuals or society.

Demand can be defined as the consumer's desire and willingness to pay a price for a specific good or service, whereas the amount that has to be paid or given up in order to get the good or service is called cost.

From all the definitions and our common sense (if we share one), we can safely assume that the more the demand, the more the supply. And therefore, in case of natural resources (unlike services) which is limited or fixed in nature, the more the supply, the more the scarcity. And defenitely, the more the scarcity, the more the cost.

What does this imply? To make it plain, the more we use a resource, the less it's available, thus the more it costs.

Can't you go for an alternative in this case? For many a reason, it can not be plausible. Few are unavailability of choice, opportunity cost (the next highest valued alternative that is given up when a choice is made) and so on.

So far, we were looking at how the more use of a resource can lead to higher cost for the same resource. Neverthless, to understand our new term, we need to diferentiate between mere usage of a resource and extravagant usage of it.

What is the extravagant usage of a resource? Of course, it's relative. The amount (unit) of usage has nothing to do with extravagance. For instance, the amount of water being used in an appartment will defenitely be more than that of in a small household.

Then waht does really constitute extravagance of usage? With any common economical sense, we can very well say that mere usage is that of need, whereas extravagant usage is that of want. Again you can argue that need and want are relative. One's want can be somebody else's need.

However, the Google guru clearly explains that the idea of survival is real, meaning someone would die without their needs being met, whereas a want is one step up in the order from needs and is simply something that people desire to have, that they may, or may not, be able to obtain.

By now, if we are clear of need (mere usage of resource) and want (extravagant usage of resource), it's time to revisit our newly coined term, extrafacultaprecium. It denotes the additional cost incurred for a resource by one, due to somebody else's extravagant usage of it. For example, in a hypothetical situation, a litre of petrol costs Rs 100. And imagine I used 1000 litres of petrol extravagantly, which made a small scarcity of petrol resulting an increase of Rs 1 per litre. Now the price of one litre petrol, when you go and buy, is Rs 101. Here the Rs 1 that you pay extra for a litre of petrol, just because of my extravagant usage, is called extrafacultaprecium.

Really? This phenomenon of extrafacultaprecium is true? It is very much true, if you are able to differentiate between need and want. Though the extra cost is not something taht can statistically be derived (at least for an economical ignorant like me), it is very much logical. It looks very much a common sense to me.

Now, if it is so? Am I not entitled for my want? It's my hard-earned money that I spend. An article in Times of India (dated Nov 25, 2010) was talking about Mukesh Ambani's first power bill in his godzilla-sized home, Antilia. The house with five members had generated a power bill of Rs 70,69,488 in a month. Though it takes a good amount of time for me (being from a so-called middle class family) to digest the news, what is wrong here? It's quite legal. It's good, as government gets more tax. But, had this 'extravagant' usage of electricity made a small scarcity of electricity in Mumbai resulting an increase of Ps 1 per kWh in that area, then those people would have forced to pay that extrafacultaprecium of Ps 1 per every kWh of electricity they used.

Is it not scary? Any extravagant usage of a resource adds an extra cost to thousands of poor people around us! And even that extrafacultaprecium gets added to my next purchase of the same resource! The more frightening fact is that it happens everywhere by everybody on every resource. When people predict that world war III is for water, never ever neglect our contribution to that war!

Next time when you go to bed without putting off your toilet light,or when you illuminate stars and serials in your home, or as you pour milk down into your deity, remember that you are so cruel to impose extrafacultaprecium on us!

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