Once upon a time in a village, a man appeared and announced to the villagers that...

 

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Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkey for $100 each. The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $100 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $200. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $250 each, the supply of monkeys become so little that it was an effort to even see a monkey, let alone catch it. The man now announced that he would buy monkeys at $500. However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $350 and when the man returns from the city, you can sell them to him for $500 each" The villagers rounded up all their savings and bought all the monkeys. Then they never saw the man nor does his assistant again, only monkey everywhere! Required: This is an example to simplify understanding of certain specific area in finance both domestic and international. Explain what this aspect of finance is and explain in brief its major role in the country like Tanzania. Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkey for $100 each. The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $100 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $200. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $250 each, the supply of monkeys become so little that it was an effort to even see a monkey, let alone catch it. The man now announced that he would buy monkeys at $500. However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $350 and when the man returns from the city, you can sell them to him for $500 each" The villagers rounded up all their savings and bought all the monkeys. Then they never saw the man nor does his assistant again, only monkey everywhere! Required: This is an example to simplify understanding of certain specific area in finance both domestic and international. Explain what this aspect of finance is and explain in brief its major role in the country like Tanzania.

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The above mentioned is a very old example of explaining greater fools theory a theory explaining a v... View the full answer