How you eat the speculation?

The speculation is to purchase a considerable amount of raw materials, works of art, foreign exchange, corporal actions or any other property for the purpose of selling it later at a higher cost than you bought it at first.

On this, the speculator (in a fine sense of the word) seeks to act business on products that generate others. For illustration, Luis planted rice and harvested about 10 million pounds.

So the era in which there is more rice cocechas Spring, Luis cannot throw the cereal marketplace all of a sudden, because its production, and that of other rice, fall below the cost, because that supply will exceed demand.

So what Luis has to act is to store part of your production until the existence of the agricultural production is scarce, the supply comes into balance on demand and the cost reach fruitful levels.

In the process of commercial game that raises the strategy of retaining the production to be appreciated in the marketplace, comes John, a speculator food.

John buys today's prices the goods to marketplace Luis thought in the future.

For illustration, a pound of rice harvested Luis sells in times of abundant harvest to RD $ 12.00 a pound. Despcaha 5.000 quintals and save some other 5,000 to the cost not less than RD $ 12.00, since the cost of production was RD $ 10.00 and the producer wants to get fine profits as any business.

John is the speculator and Luis poses to purchase the 5,000 other quintals, to enter the domestic marketplace within three months. Juan Luis agreed to purchase the rice at RD $ 12.00 per pound that is sold today.

Juan, being a student of food prices and their behavior throughout the year, recognizes that the rice will cost RD $ 12.00 in April, the month of the spring crop, worth RD $ 16.00 in July, when markets have shortages and the next harvest seems distant.

For the speculator assumes that the trend in the cost of rice will be upwards and purchase today at the store of Louis the 5,000 quintals to RD $ 12.00 a pound for three months to sell for RD $ 16.00 a pound, this mode is earned RD $ 4.00 per pound on the production stored Luis.

A Luis you choose this treatment, following this allows production dispatch all of a sudden a fruitful cost, without coming into the marketplace to depress prices.

The work of John is running the risk that rice, rather than raise, lower, for illustration, RD $ 9.00 pound and win instead of losing RD RD $ 4.00 $ 3.00.

Juan, but has experience in food prices, overproduction in the United States cheaper international rice prices may depress or unexpected import permit as granted by the Ministry of Agriculture. This causes whatever gains are lost after.

The speculation can be fine because if Luis sends everything to the marketplace to make money once the production is sold at very low prices, thus affecting production and then not in the marketplace because it is exhausted.

Some other meaning

Speculation concerning the premium cost that traders apply to essential goods for profit above normal and acceptable is some other matter. The term speculation was adapted to be synonymous on speculators, but it has to act on the scientific meaning of economic theory.