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Money Supply: Advantages & Disadvantages of Buying Bulk To Save On Unit Pricing

The Reserve Bank of India (RBI) classifies the money supply in India into four components: M1 includes currency with the public and demand deposits. M2 includes M1 plus post office savings deposits. M3 includes M1 plus time deposits with banks. M4 includes M3 plus total post office deposits. The RBI manages India's monetary system and money supply.

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Mani Krish
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474 views

Money Supply: Advantages & Disadvantages of Buying Bulk To Save On Unit Pricing

The Reserve Bank of India (RBI) classifies the money supply in India into four components: M1 includes currency with the public and demand deposits. M2 includes M1 plus post office savings deposits. M3 includes M1 plus time deposits with banks. M4 includes M3 plus total post office deposits. The RBI manages India's monetary system and money supply.

Uploaded by

Mani Krish
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Money supply

The Reserve Bank of India (RBI) is the central bank


of our country. It manages
the monetary system of our country. It has classified
the money supply of our country
into four components.
They are:
M1 = Currency with the public. It includes coins and
currency notes + demand
deposits of the public.
M1 is also known as narrow money;
M2 = M1 + post office savings deposits;
M3 = M1 + Time deposits of the public with the
banks. M3 is also known as broad
money; and
M4 = M3 + total post office deposits.
Note: Besides savings deposits, people maintain
fixed deposits of different maturity
periods with the post office.
Bulk purchasing is when a consumer captures part of the benefits of economy of scale for themself
by doing with the retailer what the retailer does with the wholesaler: paying a lower price per unit in
exchange for purchasing much larger quantities. This allows the consumer to satisfy more of his
demands at a lower total cost by acquiring more use value per dollar spent.
Consumer demand for transactions structured in this bulk purchase model of consumption has led to
the success of big-box stores. Although effected by Marginal cost, the total cost will never increase

Advantages & Disadvantages of Buying Bulk to Save on Unit


Pricing
As a small-business owner, you are likely on the constant lookout for ways to reduce overhead costs for your
company. One potential strategy is to purchase items in bulk for your business. Buying in bulk reduces the cost
per unit and can reduce how much you pay in the long run on supplies and products. Choose the items you buy
in bulk wisely to avoid ending up with more than you need.
Upfront Fees

Buying in bulk could mean you have to pay fees upfront to access the items at a lower price. For instance,
warehouse clubs, such as BJ’s and Sam’s Club, require businesses to have a membership before buying
through their stores. Also, if you plan to sell any of the items, wholesalers could require you to obtain a resale
license. Licensing fees need to be paid before you receive the state or county permit.

Spoilage

The type of goods you buy affects whether you should buy in bulk. Perishables, like grocery items, need to be
used up fast to avoid spoilage. Certain food items do not spoil quickly and can be purchased in bulk to save
items. These products include grains, nuts, pastas, spices and canned goods. Your variety is typically limited
when buying in bulk. A single item is sold in large quantities to reduce per-unit price.

Extra Space Needed

Spacing considerations must be examined before deciding whether to purchase items in bulk. If you have
plenty of storage space, bulk buying should not pose a problem. However, limited space could pose a problem
for bulk buying. If you need to expand your space to house bulk products, you could end up losing money on
the cost to rent the space.

Excess Inventory

If you choose products that are guaranteed sellers, bulk buying can prove advantageous. Review sales records
and trends before placing bulk orders. Otherwise, you may end up with excess inventory. To get rid of the
excess items, you may need to offer deep discounts on the products.

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