Jean and Dinah Economics

"Jean and Dinah, Rosita and Clementina, round de corner posin, bet your life is someting dey sellin, and if yuh ketch dem broken you can get dem all for nutten...." Those are just a few lines of one of the most popular calypsoes of all time and I am sure when The Birdie was singing this tune the average person on the street didn't realize that he was explaining the laws of supply and demand. Lately we have been hearing alot of talk about inflation and unemployment rate, but do we really understand what these terms mean and how they affect each and everyone of us?


The government is particularly proud of the fact that the unemployment rate is 5.9%, and they should be. This means that only 5.9% of the population who are capable of working is currently out of a job, this is a small percentage and this means that more families and individuals are bringing home a salary. From this, one can infer that there is more production, that is more employers are creating goods and services for consumers. Individuals would have more money to spend and depend less on the government, which can then focus their spending on other things, like building a new house for the PM or buying a new jet for CARICOM leaders. This seems like a good thing, no? Hence the big hoorah that was made by the government on this accomplishment. As with everything in life, there is a catch.

With all this apparent prosperity, high oil prices, low unemployment rate the prices of goods and services are increasing. One would think that the opposite should happen, but as many economists have shown when there is low unemployment there is high inflation and vice versa. But what is inflation? Inflation is defined as the loss of purchasing power of the dollar. Basically, the cost of goods and services have increased while the amount of money that you have stays the same. There are many, many causes of inflation and it is beyond the scope of this article to go into detail about all of them but I would like to outline some general concepts. As Sparrow noted in his classic, when there is low demand the prices of goods and services drop (hence the reason Jean and Dinah could be had for nothing), however, when there is high demand for goods and services the prices increase forcing you, the consumer, to pay more. Now, usually the salary that one works for stays the same, however, the cost of goods go up so the money that you have can now buy less.

What causes the prices of goods to go up if we are enjoying high oil prices? Well, the first question is are we really enjoying the benefits of high oil prices or is the government the only ones getting the benefits? Let's see if we can examine why you would pay more for, say, bread. First, the baker needs flour. Where is that flour coming from? The baker would get the flour from the supermarket, who gets it from the flour mills. The flour mills get the wheat from overseas. Now, with the increased cost of oil, the shipping companies would charge more for delivering the wheat because they have to pay more for diesel to bring the wheat to Trinidad. The flour mills in turn would pay more for natural gas to process the wheat into flour. The cost for both of these things would be passed on to the supermarket who would need to raise the price of the flour to cover its cost and this would cause the baker to charge more. Hence, you would need to pay more for the bread! Make sense? The same would apply to everything else. Another cause of inflation is more money being circulated when there isn't more production to justify the new money. Remember that money is just a piece of paper that represents some commodity.

This is all very confusing but in the end we, all of us, need to understand money and learn about it. Money is not just something you work for but something that you need to make work for you. Understanding where your money comes from and what it is worth is very important and if we understand it we can make better choices and force the leaders to employ better policies to benefit us all.