Economics Nowadays

Nowadays, economics are playing vital role that gives great contribution to the whole world. The object of studying economics is to fulfill human unlimited wants with limited resources that are tough to accomplish. Since the population of the whole world is raising year-by-year, resources we had is decreasing year by year. But, basic needs for a human to survive are a shelter, food and clothes. As the populations raises, the outcomes of these basic needs are not even enough for humans. This is what economists try to solve.

In the first chapter I had learned for economics, is the problem of scarcity. The problem of the scarcity arises is because of the excess of human wants over what can actually be produced and because of scarcity, various choices have to be made between alternatives (Sloman, Wride and Garatt, 2012). As an example, one of the district in Mumbai, their state run coal based thermal plants have been consuming too much of water for the past few years until there are no water in the dam is causing drought in the few districts in Mumbai (Bureau, 2013). Because of the limitless of the water, it had caused a very big problem to 16 districts and thousand of villagers. Although, not everyone facing the problem of scarcity to the same degree. Example, a rich family can buy more things than the poor family and the poor family must made choices between alternatives because they can’t afford the two things in the same time (Sloman, Wride and Garatt, 2012). Let’s say about money, we all like money, why government doesn’t print more money for their citizens instead of the limited amount of the money (Sloman, Wride and Garatt, 2012)?  It is because when the government prints too much money for a country, the inflation will get high and exchange rate will become lower. These problems will still arises because the world has limited resources in it and also limited factor of production.

Price doesn't affect the demand of cigarettes.

Another theories that I had learned in economics are supply and demand. Demand is referred to the wants, if we give free items to the society, demand for it will constantly increase. For supply, it is related to the resources that how much the market can produced for the society and does it enough for the demand for the consumer, but usually potential demands will exceed potential supplies and therefore, society has to find some way to solve this problem. This will be applied when the aggregate demand need to be balanced against the aggregate supply. As an example, the demand and supply of cigarettes in Malaysia. If the consumers sense that the cigarettes price will rise in the future, they will buy more before the price increase. At this point, producer will try to produce more cigarettes because they know that demand for cigarettes is high in Malaysia. Although the government of Malaysia increase RM0.20 per packet of cigarettes until now is RM10.20, demand for cigarettes will never decrease. Law of supply also simply means that the producer will produce a certain product for  a higher price instead of a lower price because they know the people will still buy cigarettes although the price had raise. Even though we know that when certain price of the good or service had increase, the demand for the certain goods will drop also because of the demand had dropped, supply for the certain goods will drop also. But for cigarettes is different, although the price of the cigarettes had increase, they will still buy it. This is because people getting addictive to cigarettes. They might change the brand of the cigarettes to the cheaper one instead of the expensive one. There are more than 100 types of smuggling cigarettes that only cost RM3.50 for 20 sticks compare to the type of cigarettes that you can buy in the shops. Smoking had caused high death rate every year in Malaysia. The Health Minister of Malaysia had set up free clinics to help citizens to quite smoking. During the year 2009, cigarettes that you found in the market was just RM9.30 but after that it raises by RM0.70 which is RM10 in year 2010. During the year 2012, the cigarettes price increase again by RM0.20, which is RM10.20 however one year later, certain brand of cigarettes had increase to the price of RM10.50. This is one of the way that the Malaysia Government implement to make smokers quite smoking. But, it doesn’t seems useful.

 Another example for supply and demand is food. As we know that food is the basic needs for a human. If we don’t eat, we might just die in hunger. What will happen when food is not the answer to hunger (Rosenberg, 2013)? An article in an online journal The New York Times, says that a tsunami had hit Indonesian that causes a huge losses. The world is giving free aid to the people around there. The people in the area that the tsunami hit needed food badly but the foreign minister of Indonesia says that don’t send any more food for the tsunami victim. But most of us might think that this is quite crucial for the tsunami victim. Actually the fact is, Indonesian got a lot of food to be bought but because of too much of free foods that had been given by the world, local food market couldn’t make profit for it. Demand for the food since become so low. Farmers had been undercut and the chain of supply fell off.

Besides that, subsidies are closely related to economics too. Malaysia government subsidies petrol for their citizen, which is now the price for RON95 is RM1.90, Diesel RM1.90 and RON97, is RM2.00 (Kevin, 2008). But in year 2008 November, the government stopped subsidies for the petrol. At one good point, government can save a lot of money, but in one bad point, demand for car will decrease due to petrol is the substitutes for car. Besides that, if the government stop subsidies petrol for the citizen, the car market will suffer in the demand problem which is not enough for them to sell off.

Lastly, which are the theories of price ceiling and price floor. Price ceiling, which defines the meaning of maximum prices set by the government for particular goods and services that they believe are being sold at too high of a price and thus consumers need some help purchasing them. Somehow, price floor are minimum prices set by the government for certain commodities and services that it believes are being sold in an unfair market with too low of a price and thus their producers deserve some assistance. Both of them are the method of price control. A simpler way to explain price ceiling is, price, which is the legal highest that a producer can use to make profit and price floor is the legal lowest price for a producer to make profit. But when the price goes too high, supply problems might arise for the producer and when the price go too low, it might arise demand problem too. As an example, Malaysia government is using price ceiling theory to control the price of the cigarettes. Maximum for a pack of cigarettes is RM10.50, Producer can’t go higher than this price or even lower. The purpose for the government to do this is to control the demand for cigarettes among the citizens that going too high. Cigarettes had arises many health problems in Malaysia. But it doesn’t seem useful as I stated in the paragraph above. For a country, when government imposed the price ceiling or price floor to certain goods, producers or sellers that do not obey the rules is illegal. This is what we called black market which price control had been avoided.

Sources: college-cram.com