Ill.5.2.b Decentralized Transaction

Ill.5.2.bDecentralized Transaction | Author

5.2.1 | LAW OF SUPPLY & DEMAND

The law of supply & demand states a relationship between the price of the goods & services set by the supplier end & the willingness of the consumer to buy it. Generally, when the prices hike up, the supplier end is keen on supplying more goods & services, & demand less comparatively. Vice versa happens when the price falls in the market. The law is an amalgamation of two distinct laws - law of supply & law of demand . The interrelation between the two laws determines the actual pricing & volume of goods & services in the market.

As per the law of demand , higher the price of the goods & services, the demand for the same will be less. Eventually the consumer will avoid consuming the product due to the higher prices & will be forced to buy some other product that may be of a greater value.

The law ofsupply demonstrates the quantities of the goods & services sold at a specific price. Unlike the law of demand, here the slope is upwards, denoting that the price & supply rate are directly proportional.

To summarize, the law explains how the price of a product increases when the supply of the same decreases, making the product a rare piece in the market. On the contrary, it also states how the price of a product decreases when its supply is so abundant that the product becomes a common piece in the market, losing its unique identity.

5.2.2 | THEORETICAL ADVANTAGES

The amount of flexibility the free market offers to all scales of industries & businesses makes it a more democratic form of economic system. Unlike the command economy, where the incentives are shared across the central authorities, the free market provides an open platform to village industries, small scale industries & entrepreneurs to establish themselves & also acquire the share of profit they earn.

From the consumer ’ s perspective, they too have a flexible opportunity to choose the goods & services they want or need to consume, not just in terms of the volumes of varied products, but also in a varied range of pricing. A mutual & a direct transaction between the supplier end & consumer end, without a significant interference from a central authority ensures a trustworthy economic output that benefits both suppliers & consumers individually & also benefits the market as a whole.

A rational quantification of the goods & services required results positively in decrease of the rate of wasteful resources. The market graphs evidently indicates at the goods & services that the consumer is in need of, & in how much volumes. Accordingly the suppliers maintain their rates of manufacturing & set their prices independent of any external interference.

5.2.3 | THEORETICAL DISADVANTAGES

An absence of a central authority creates space for multiple permutation & combinations in terms of the economic possibilities in the market. The means of production & consumption are in varied forms that are difficult to be categorized in general brackets. Economic issues at a national level seem difficult to be handled efficiently under the absence of a central authority. In the aim of achieving personal profits, the national economy can suffer to some extent in terms of its balance. Monitoring these multiple possibilities becomes a complex process hence resulting in an imbalance in the functioning of the system.

National economy runs as a network of distinct sectors, as mentioned earlier. A weakening in the interlink between these sectors has a direct negative impact on the national economy. With no parity between these sectors, a downfall in one of the sectors also affects other sectors. At certain instances, it may be a possibility that an upgrade in one of the sectors negatively affects the other sectors & hence the economic progress can be non-uniform.

During periods of a national emergency, it is argued that a control of the central authority on the security as well as the economy is a feasible option to have quicker decision making for faster & efficient results. On the contrary, it can be said that the introduction of additional bodies that maintain & monitor the balance of the economic situations in the nation can assist the central authorities, the government to be precise, in achieving the solutions during the periods of emergency, with utmost efficiency.