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.
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| 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.
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| Sources: college-cram.com |
