Pyramid Scam Connected with Economic Principles Essay

In the new news, pyramid scam is among the reports that gained focus from the public. Pyramid rip-off is a deceptive scheme in which people are recruited to make payments to the person who recruited them while looking to receive repayments from the people they generate; when the volume of new employees fails to preserve the payment structure the scheme breakdowns with most of the members dropping the money they put in. An organization called Aman Group Israel Incorporated (AGPI) operated this kind of scheme and victimized persons mainly in Pagadian Town and has spread in other locations like Dipolog City in Zamboanga delete Norte, Iligan City, Cagayan De Dinero City, and Kidapawan Town in Cotabato. AGPI's investors claimed that they can " double the money” that the player provided as well as the participant can earn as much as 31% in 8 times or totally in a month. No wonder for what reason many persons engage in this type of investment let's assume that they can acquire what exactly their very own recruiter guarantees to offer them. However , there are many speculations that the Aman Group is said to be a Ponzi scheme, a scam that pays comes back to shareholders using other people's investment funds, the investment returns are merely taken from the person's own money or from funds given from subsequent shareholders.

There are three principles of economics that can be applied from this issue. The first principle is coming from Mankiw's basic principle, " People Face Tradeoffs” wherein to get one issue, you have to stop something else. Within a networking business, a person being recruited will be urged to invest or allot his/her money in exchange for a much larger payment inturn. The second basic principle from Mankiw is " The Cost of Something is What You Give Up to Get It. ”, which the decision-makers have to consider both obvious and implicit costs of their activities.  In doing a network business, the participants assess the pros and cons, the price, and end result of their package. The third rule that can be used in a pyramid...



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