Economics

Advantages and Disadvantages of the Wholesaler

len Alfred Ajibola - Wed, 12th February, 2020 @ 3:58 PM

Topics in Economics

Types of capital market: Primary market and secondary market Capital market explained with its functions Basic tools for economic analysis: Graphs explained with its characteristics and importance Basic tools for economic analysis: Tables explained with its characteristics and importance Factors affecting population in economics Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market What is a Market in Economics? Elasticity of supply explained with its types Supply Elasticity: Elasticity of Supply explained


Academic Questions in Economics

Please click here to see all Questions and Answers

_____ is defined as a gradual and sustained rise in price level of goods and services in relation to their availability.

  • A. Basis Point Rate

  • B. Hike Rate

  • C. Elastic Supply

  • D. Elasticity of Price

  • E. Price Inflation

  • F. Aggregate Supply

The wholesalers can bring about an economy of scale.

  • A. True

  • B. False

Which of the following statement isn't a characteristics of the wholesaler?

  • A. They may have to operate in specific areas or regions accorded them by the producer

  • B. They are often popular in the line of goods they supply

  • C. They are not risk bearers

  • D. They have good storage facilities

  • E. They often pay for goods supplied by the manufacturers in advance

  • F. They usually have business agents or brokers

The wholesalers act as the middlemen in supply chain.

  • A. True

  • B. False

Large retailers who buy directly from manufacturers are termed as _____.

  • A. Wholesale Retailers

  • B. Certified Retailers

  • C. Codified Retailers

  • D. Commodity Retailers

  • E. Manufacturers Retailer

  • F. Conspicuous Retailers

_____ is a market whereby the sellers buy goods in lesser quantities from the wholesalers and sells in bits to the final consumers.

  • A. Commodity

  • B. Retail

  • C. Wholesale

  • D. Labour

  • E. Common

  • F. General

Which of the following is not a financial market?

  • A. Money Market

  • B. Bond Market

  • C. Foreign Exchange Market

  • D. Virtual Market

  • E. Capital Market

  • F. Stock Exchange Market

A _____ market provides a platform whereby job seekers link up with employers in an attempt to be hired.

  • A. Wholesale market

  • B. Bond market

  • C. Physical market

  • D. Virtual market

  • E. Factor Market

  • F. Labor Market



Advantages of the Wholesaler:

A wholesaler is a trader who purchases goods in large quantities from the manufacturer and resells them to retailers in small quantities.

Please read on retail market here.

You can read on the functions of the wholesaler here.

Below are the adavantages or benefits of a wholesaler:


  1. They enjoy the benefit of buying from the producers at a very cheap rate. To this end, they make some good amount of profit by selling in large quantities to the retailers.
    Please read on wholesale market and the wholesaler here.

  2. They provide employment opportunities either directly or indirectly. This is achieved through the hiring of agents, drivers, offloading personnels and so on.
    You can read on the functions and characteristics of commerce here.

  3. The functions of the wholesaler may bring about an economy of scale. This implies that the prices of goods will fall because the producers' eventually end up manufacturing more goods through the wholesaler's action. This action of theirs can be attributed to the awareness and marketing activities carried out by the wholesalers on a product.
    Please read more on marketing here.

  4. Their purchases are simplified (made easier) since they usually buy their products from only one manufacturer or producer. Time and money are saved through this act.
    You can read on cheques as a method of payment here.

  5. They can bring about the production of better products due to product marketing, research and effective communication with the manufacturers.
    Please read more on advertising here.

  6. The wholesalers help to keep the prices of goods stable because they generally sell at a standardized price.
    Please read on supply and law of supply here.

  7. They receive huge discounts and preference from the producers because they buy in large quantities.
    You can read on business and characteristics of business here.

 

Disadvantages of the Wholesaler

  1. Some wholesalers may instruct the manufactures to deliberately produce substantial goods for the people in their country. This very act had led to loss of lives and properties.
    Please read on the disadvantages of money here.

  2. For the sake of more profit, they may disrepute the name of the manufacturing company by adulterating their products. One way they go about this is by remaking the original product through the mixing of inferior quality goods to a manufacturer's superior quality goods. In short, the product becomes adulterated through their actions.
    Please read on consumer right and protection here.

  3. Some wholesalers may bring about the loss of innocent lives by deliberately distributing the sale of fake or dangerous drugs.
    Please read on the consequences and solutions to drug trafficking here.

  4. The wholesaler may suffer a huge financial loss when they buy incorrectly checked products from the manufacturing company. Some of these products may become faulty before or during the time of storage.
    Please read more on the functions of the wholesaler here.

  5. Since they are the link to the producers, they may negatively affects the product's sale by providing wrong information to the producers.
    You can read on production here.

  6. Wholesalers that utilizes a rented warehouse will incur additional cost, thus bringing about a reduction in their profit.
    Please read on the characteristics of the wholesaler here.

  7. They may be involved in black market by illegally importing and selling firearms. Stealing and cultism will be encouraged through this acts.
    Please read more on black market, its advantages and disadvantages here.

  8. Wholesalers who find themselves as the only supplier of a product may exploit the final consumers by selling at a much higher price. In this case, they become a monopolist of the product.
    Please read on market and types of market here.

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Amazing facts in Economics


Notable points in Economics

A unitary elasticity of supply is seen when a change in price brings about a corresponding and proportional change in the quantity of goods or services supplied.

The graph below shows a unit elasticity of supply:
Unit Elastic Supply Curve - Len Academy

Below is an instance of a unitary elasticity of supply:

  • If a 100% increase in the price of wheat translates into a 100% increase in the production and supply of wheat, then the supply elasticity is said to be unitary elastic and its value is equal to 1.

Unitary elasticity is always equal to 1, that is: Es = 1

The supply curve runs diagonally and will pass through the center.

Supply elasticity is defined as the rate at which an increase in price of goods translates into its increased production and availability in the market. Supply elasticity is also termed as price elasticity of supply.

Consider the statements below:

  • If a 100% increase in the price of rice translates into a 100% increase in the production and supply of rice, the supply elasticity is said to be unitary elastic and its value is equal to 1.

  • If a 100% increase in the price of rice translates into a 50% increase in the production and supply (quantity) of rice, the supply elasticity is said to be inelastic and its value will be greater than zero and less than 1. In this case, the exact value is 0.5: (value of change in the quantity of rice divided by value of change in price of rice = 50/100 = 0.5).

  • Please read on supply elasticity here

The individual demand schedule is a table that shows the demand of a commodity that an individual (consumer) purchased at various prices, and at a particular time.

The table below shows an individual demand schedule:

Price in Naira (of a tuber of yam)

Quantity demanded (per week)

500

5

400

10

300

15

200

20

100

25

The market demand schedule is also referred to as an aggregate demand schedule, total demand schedule or composite demand schedule.

This is a table that shows the different commodities purchased by all the consumers or customers in the market.

The market demand schedule is the summation of the individual demand schedules, showing the demand of different customers for a commodity at a particular price. It is shown in the table below:

Unit price of commodity (Naira)

Quantity demanded by consumer A (QA)

Quantity demanded by consumer A (QB)

Market demand (QA +  QB)

50

20

15

35

40

40

30

70

30

60

45

105

20

80

60

140

10

100

75

175

 

From the above table, notice that when the unit price of the commodity was 50 Naira, consumer A demanded 20 quantities while consumer B demanded 15 quantities.

Please read more on demand schedule here.

Below are definitions of demand from the perspective of some notable professors:

The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.

Professor Mayers

Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.

Professor Hibdon

The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.

Professor Benham

Generally, demand is defined as the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.

From the above definitions, we can infer that the definition of demand is referenced to three major factors. These are:

  1. Quantity of Goods Demanded

  2. Price

  3. Time

Please read more on the concept of demand here.