Small Changes Big Effects Any economy, irrespective of how small it is, depends on many different factors.

These factors are the results of the interaction between the components of the economy. Any small change in these factors leads to Bull-whip effect and cause huge effects in the economy and on its components. This article shows that how a very small change can lead to large consequences. The test subject here is the Kolkata Metro Railways, the oldest metro system in India. According to a recent study, the capacity of each coach is 300 people. A train consists of 8 coaches and the train runs on an interval of 5 minutes. The total operational time is 15 hours per day. Thus we can make-out that there are 180 journeys in a day (15 hrs/5 min). The average train carries 2,400 passengers and 6 lacs passenger per day use the metro system. There are 24 stations of metro. Case I: Metro running time interval is 5 minutes. In the other metropolitan cities, this time is 2 minutes. Thus we are looking on opportunity loss of three minutes utility. Thus if 6 lacs passenger travels everyday using metro, on the face the total loss is 6 lacs*3 minutes = 18 lacs minutes. But the economy as a whole is effected by any of its subjects actions. Thus for every 3 minutes opportunity loss for 1 person there are other people to who get effected and delayed. For example, a shopkeeper opens his shop 3 minutes late. A customer waiting for him gets delayed by 3 minutes. Or it may happen that in these 3 minutes, he changes his mind and dont buy the goods at al l. Thus it will affect the flow of wealth in an economy. This is same as the principle of Butterfly effect. Here for easy understanding, we assume that 5 people including the original traveler is affected. Thus the total loss is now 6 lacs*3minutes*5 people= 90 lac minutes per day. Thus per year 32,850 lac minutes/5475 lac hours (90 lac*365 days). For valuation of loss we are taking the minimum wage rate i.e. Rs.6, 000 per month or Rs.25 per hour. The valuation here seems appropriate as the majorities of travelers are from upper & lower middle class and earns much more than what we are taking here. Thus the total loss becomes 5,475 lac hours*Rs.25 per hour = Rs.136875 lacs or Rs.13687.5 million. Case II: Every person must go through a physical luggage checking process. Now assuming that 17 % of people are carrying bags. Thus nearly 1 lac passenger goes through bag checking everyday. Assuming that there is 10 second loss per person, the total loss being to the tune of:

1 lac * 10second*5perons*365 days = 18250 Lac seconds / 5.07 lac hours. The total monetary loss becomes 5.07 lacs hours * 25Rs/hour = 12.675 million Case III: There are 3 4 counters in every station but there are only 2 counters manned and functioning on average. There are 2400 passengers per train, thus there are 100 passengers per station (assuming every station has same number of passengers). We assume that 30% of the total passengers do not carry smartcards, thus they need to purchase tickets/tokens to travel from the counter. Thus there are 30 passengers per station who will purchase these tickets. That means it can be said that there are 15 people per counter. We further assume that these passengers come in three groups, all consisting of 5 persons. Thus for the first group there is a time cost of: 1st person: 6 seconds (say, as it is minimum a vendor will take to generate a ticket and collect cash) 2nd person: 6second + 6 seconds of the first person (as he is standing in the back of the first) 3rd person: 6 + 6 + 6 4rth person: 6 + 6 + 6 + 6 5th person: 6 + 6 + 6 + 6 + 6 Total time taken is 90 seconds and there are 3 groups with 2 counters. Thus the total loss is 9 minutes/100 travelers. Now if all three counters are open for service then there will be10 people per counter. And there will be only 3 groups per counter of 3 people in each group and an extra person in the last group. Then the total loss will become: 1st person: 6 seconds 2nd person: 6+6 3rd person: 6+6+6 Total loss is 36 seconds per group and there is an extra person in the last group whose time will be 24 seconds. The total loss = (36sec * 3groups) + 24sec for last person = 132

seconds. There are 3 counters thus total loss per 100 people is 132sec * 3 counter = 6.6 minutes. Thus by not using the third counter the economy losses 9 minutes 6.6 minutes = 2.4 minutes. Total monetary loss will be (2.4minutes/60 minutes)*24 stations*180 rides per day *5 persons*25 Rs/hr = 21600 Rs per day and 7.884 million Rs per year.

Thus the total money an economy can save here is 13687.5 million + 12.675 million + 7.884 million or 13708.1 million Rs per year. The present value of this loss for 5 year assuming the same loss every year at rate of 9 %( Fixed Deposit Rate) is 13708.10 * 3.89 Factor or Rs 53319.73 million.

Regards Akash Kapoor Bachelor. Business Law, CA-Inter, CME, CPFP Email Id : Kapoor.akash12@rediffmail.com