Price ceiling for petrol in Malaysia

What is price ceiling?

Price ceiling is a adjustment set by the government that makes it illegal to charge a price higher than a specific level. The application of a price ceiling allows consumers to purchase items that were previously unaffordable at a higher price. Price ceiling often impose to protect the benefits of the consumers.

It has no effect on the market if the price ceiling is set above the equilibrium price as it did not lower the price of goods for the consumer. Therefore, price ceiling is often set below the equilibrium price.

On the other hand, price floor is a adjustment set by the government that makes it illegal to trade at a price lower than a specified level. The implementation of price floor is to protect the benefits of producers of unproductive sectors. 

Normally, price floor is set above the equilibrium price. If the price floor is set below it, it has no effect on the market as it did not help the producers to earn more profit. 

When government set the price ceiling and price floor, shortage and surplus happen permanently. 

Based on the link of the article below, the government of our country, Malaysia had set a price ceiling for the price of petrol in the year 2008. 

"We are aware when diesel price increases, it will take a toll on public transport and lorry operators. Nevertheless, they cannot raise fares to their whims," Domestic Trade and Consulmer Affairs Minister Datuk Shahrir Abdul Samad said.

Petrol is the main resources for transportation, people need petrol to travel around with their motor vehicles. The objective of setting this price ceiling is to protect and lighten the burden of consumers. For example, when petrol price increase, the bus drivers and lorry operator can not raise fares. The increase in the price of petrol had burden them financially. Therefore, the government had set a price ceiling for petrol to remain at the price of RM2.70 per litre until the end of year 2008. 

Other than setting the price ceiling, the government also gave out cash rebate to cars and motor vehicles owner. These rebates purpose is to support the people with lower incomes.

Written by: Lian Vickki 0315648

Resources: http://www.themalaysianinsider.com/malaysia/article/Petrol-ceiling-price-to-remain-at-RM2.70-until-year-end-says-Shahrir

Apple products will be crazy high demand!

Apple is a really well-known brand in the market. It is indeed, one of the world's top brand with the best information technology company. With the creation of the first iPhone 2G by Apple, the market has brought to a whole new different level. Consumers are purchasing and demanding more of the product. 

As a result, this bring companies such as Samsung and Nokia to create something similar like iPhone products. 

Moving on, based on the article on the surveyed information, the demand of Apple products will increase in year 2012. Have you ever wondered why is the demand of Apple product would increase year by year even the price of apple product remain unchanged? This phenomena is caused by several factors. 

First and foremost, one of the factor that effect the quantity demand of apple is the income of individuals. 

When the customers' income increases, the ability of them to purchase Apple products would also increase. As they would not need to worry about their money running out, purchasing products as expensive as Apple would not be a problem to them.

Besides that, the number of buyers also affects the demand of Apple product. When more consumers purchases the product, Apple would take a step to solute this problem by supplying more products. Thus, the demand of Apple products will then increase.

Moreover, the consumers may be attracted by the advertisement. Like any other marketer, Apple is no different, they are promoting their products as much as they can by advertising them on television, billboards, banners, and many other more. This attracts consumers' attention, thus making them to find out about the product and then purchasing it later on.

Furthermore, the price of related goods is one of the factor that will effect the quantity demanded of Apple products. When the price of substitute goods increase, such as Samsung, the demand of Apple products will then increase too. This is due to customers wanting to purchase cheaper products. 

A shift in the demand curve to right or left is caused by a change in all other factors except the price of product. In brief, the demand curve will shift to the left when quantity demand decrease and will shift to the right when quantity demand increase.

When the demand curve shift to the right , it shows that the quantity demand has increase from Q0 to Q1.

In conclusion, the factors explained the reason why Apple products is gradually increasing in year 2012.

Written by : Koh Ru Yee 0315289
                    Ling Xin-Zhe 0315463

Resources : http://www.appolicious.com/tech/articles/10495-survey-suggests-apple-products-will-be-in-crazy-high-demand-in-2012

Land scarce Singapore looks underground for space

We need resources to produce goods or services. The main resources that are applicable to the society are normally referred to the inputs or factors of production. 

There are four basic factors of production:

• land
• capital
• labour 
• entrepreneurship

We will soon face the problem of scarcity of these three factors as the resources are limited.

 

The concept of scarcity states that our human wants are unlimited while the resources is not. Scarcity occurs when human desire more things than the available resources can provide. With the limited resources we have, human have to make rational choices on the usage of resources to maximize their benefit and profit gain by sacrificing some goods or services. The value of giving up the goods or services is known as the opportunity cost.

Based on the link of the article below, we can see that Singapore is facing the problem of scarcity in land. The factories, buildings and the population in the country are increasing gradually but they have limited land space. 

Therefore, the Singapore government has started to look for solutions for this matter. They have a new plan for releasing land or ground for housing and industry by closing golf courses and army training ground and also paving over some of the nature reserves. The government has make a choice to lease the land or ground for housing and industry purpose and sacrifice golf courses and military ground. The value of giving up the golf courses and military ground is the opportunity cost.

Besides that, the Singaporean considered to develop and make full use of the underground space due the scarcity of land in the country. The Jurong Town Corporation has study and do research on the “underground” project. 

The corporation has overseen the construction of a huge underground oil bunker in rock cavern. As a result, a surface area of six petrochemical plants has freed up. To overcome the problem of land scarcity, the Singapore government and corporations has think of many solutions and also made sacrifices.

Written by: Lian Vickki 0315648

Resources: http://newsinfo.inquirer.net/363211/land-scarce-singapore-looks-underground-for-space

Another Fuel Price Hike Expected

"South African motorists will be paying the highest they ever have for petrol from midnight tonight.And to compound their woes, it looks set to increase again in the near future."

"Joburg petrol station owners are anxious about their pumps running dry today as motorists clamour to fill up before the huge price increase at midnight. "

Are people going to stop purchasing fuel when the price is increased? Are they going to walk to their destination? Are they going to purchase a new living place near to their offices? The answer is no. There is no solution to that, except facing the fact that they have to accept the increased price.

As the years goes by, the news of the prices of fuel increasing can be seen and heard so frequently. It is gradually increasing as time goes by. Fuel is something the all of us need in order to continue our everyday lives. In other words, it is a necessity. Without fuel, transportations are not possible. People won't be able to move around to the places they want, export & import wouldn't exist and also many others.

As a result, even when the price rises, the demand is not significantly impacted. Therefore, fuel is an inelastic demand.

Based on the graph above, the explanation goes when the price of fuel rises, the change in quantity demanded is only a little. This is why fuel is an inelastic demand, as it is a natural resources and there is no substitutes to it. People have no other choices but to purchase it as they need it or their daily activities can't be done.

Written by : Ling Xin-Zhe 0315463

Resources:

http://www.iol.co.za/business/business-news/price-hike-pumps-up-petrol-pain-1.1540696#.Ud8V3vnfBHQ

Market Equilibrium

           Do you know what is market equilibrium? Let me tell you about this. Market equilibrium is in a  situation which the current price is equal to quantity demanded and it is a state of balance that happened between two points.

                      The graph above shows the equilibrium price and quantity.When the market is in equilibrium , there is no tendency for the price to increase or decrease.

                  According to the report from Ukraine, the hotel development in Ukraine was booted forward due to the Union of European Football Associations 2012 championship, but now the excess supply is threatening to tackle hotel operating performance. In 2012, despite the UEFA event, occupancy in Kiev dropped to 44% from 54% a year earlier.

             If the price is set too high, excess supply will be created within the economy and there will be allocative inefficiency.The shaded area A is call as surplus that above equilibrium point, which mean the excess of supply.

                  The hotel development in Ukraine having the problem of excess supply which name as surplus. The graph above has describe the situation of the hotel development in Ukraine. When a situation in which the producers are willing to sell more than consumer are willing to buy, it presents excess supply and also name as surplus. It occurs when market price is above equilibrium price.The hotel development in Ukraine are trying to supply more hotels, which they hope to increase profits, but when customers are consuming the hotels will find the hotels less attractive and purchase less because the price is too high.
                  The hotel development in Ukraine should decrease the price of hotel to eliminates exess supply by changing quantity demand and quantity supply until it move to the original equilibrium point.

Written by : Koh Ru Yee 0315289
Resources : http://www.hotelnewsnow.com/Article/10389/Ukraine-struggles-under-excess-supply

What is Oligopoly ?

An oligopoly market is a market that have few large sellers competing with each other.

For example, the telecommunication market in Malaysia which included Maxis, Digi and Celcom.

These three companies are the large sellers in the telecommunication market. This is because there are high barriers to entry to this telecommunication market which involve the licensing and regulations, heavy capital investments and minimum efficient of scale required that restrict entry of competitors. This causes they are the only large sellers among the telecommunication market in Malaysia.

They provide differentiated services to attract consumer to consume their services. They offer different calling plans, online plans, caller ringtone and so on.

An oligopoly can considered a 'price-maker' which means that they can set their price according to their wish to maximize their profit but in return they need to consider the rivals action. For example, if Maxis plan to increase the price of calling plans, Maxis have to consider that action of Digi and Celcom, if they do not increase their price, naturally consumer will choose to consume the same service with lower price, thus Maxis cannot increase the price of calling plans to increase their profit.

Apart from that, they can have non-price competition between each other. They can create brand loyalty and build a long-term profitable relationship with consumer. Therefore, it can reduce the opportunity that consumer switch brand. They can also do advertising to magnify and inform people about their benefits and promotions.

However, an oligopoly market always face the problem which is to compete or cooperate with rivals. If they choose to compete, this may benefit the consumers because they have to consider the price they set and provide better services in order to attracts people to consume their telecommunication services. If they choose to cooperate which is so-called to form a cartel, they are able to create a huge monopoly and make decision on price set and the level of output. Thus, they can earn supernormal profit in no matter short-run or long-run. It is illegal to form a cartel in some countries to protect the consumers.

written by : Kwong Shu Zen 0315596
resources :
http://amazingeconomics.wordpress.com/2012/11/21/the-telecommunication-industry-in-malaysia/
http://www.thestar.com.my/News/Nation/2012/10/30/Maxis-adds-more-options-to-existing-Internet-plans.aspx

Is National Electricity Board (TNB) Malaysia a monopoly ?

Yes. The National Electricity Board (TNB) Malaysia is a monopoly. This is due to TNB possess some characteristic that shows that it is a monopoly market. 

First of all, TNB is the only firm in Malaysia that supply electricity to people, TNB do not have any competitors in the market. It provides unique services instead of the homogeneous products. Thus, it means there is no substitutes for TNB.

Apart from that, TNB is a price maker that has ability to raise the price without losing demand of people to consume the electricity. It has to 'market power' that can control over the price, unlike the perfect competition. Thus, they use the profit-maximization strategy which is the level that marginal revenue equals to marginal cost, it is also the equilibrium output. It can be shown at the graph below.

TNB also earns a supernormal profit no matter in the short-run or long-run. This is because TNB is a monopoly and it has high barriers to entry to restrict the entry of competitors. One of the barriers of entry is patents or licensing. There is only one firm in the market supply electricity which is TNB because it has the illegal lisence given by the government. Therefore, there is no other competitors could come in the market and compete with TNB and they can earn a supernormal profit in the long-run. 

written by : Kwong Shu Zen 0315596

resources :

http://www.tnb.com.my/investors-media/demand-sales-foreign-shareholding.html                  http://www.tnb.com.my/tnb/application/uploads/annualreports/e5dcad80d1621d1b705519b7041f598c.pdf