Price Elasticity Of Demand - Pang Ru Yee

Price Elasticity Of Demand Of Petrol

The price of petrol at the pumps has risen substantially over the past few years. In the UK, according to here, the average price between January and June 2011 was 133.13p. The consumption of petrol and diesel are given in the following table.

UK consumption of petrol and diesel (tonnes millions)

	2006	2007	2008	2009	2010
Petrol	18.14	17.59	16.68	15.76	14.99
Diesel	20.15	21.07	20.61	20.06	20.87
Total	38.29	38.66	37.29	35.82	35.86

                                                                                                

Articles
Cash-strapped drivers cut petrol use by 15 per cent Channel 4 News (5/10/11)

WHAT IS THE FACTORS THAT CAUSED THE CONSUMPTION OF PETROL AND DIESEL DECLINE?

In my opinion, the reason why the consumption of petrol and diesel drop :

-is the rising of the price of petrol and diesel. If the price of the petrol and diesel is fallen, I think the quantity demanded of the price and diesel will increase.

-In the theory of price elasticity of demand, petrol is grouped into elastic demand. It is because, many people cannot afford the high price of petrol, hence they are not willing to drive car so the demand of petrol will decrease.

-The level of income is also one of the factors that caused the petrol and diesel decline. When people has lower level of income, people are much more sensitive to the price of petrol compared to the people who has high level of income.

-Furthermore, if people think that petrol is in high price, they might want to take LRT or MRT. LRT and MRT is save cost and will not cause environment pollution. 

   

Post by Pang Ru Yee

GDP Growth - Pang Ru Yee

World's Second Largest GDP Growth Remains Clouded....

China is the second largest country in term of Gross Domestic Product (GDP) in the world. After decades of skyrocketing growth in China's GDP, many are expecting China will go through a tough growth this year. 

GDP = C + I + G + (X - M )

According to a forecast surveyed recently from a group of analyst, China's GDP has already slowed down in the 2Q of 2013.

With U.S. recovery remains slow and the Euro zone is merely in recession, this hamper China's manufacturing and exports sectors. 

The exports growth rates are down from past double-digit growth rates, after government cracked down on institutions overstating their balance sheets to claim tax rebates.

There are some turmoil in the interbank lending market due to the unexpectedly declined to further ease liquidity  to the market by China's central bank.

The credit tightening in China which took parts since May causing cash crunch in China's lending market. The money supply (M2) in China rose more slowly in June compared to May.

While the consumer price index (CPI) looks tame in June, a higher food prices poses a greater threat to China's inflation. Meantime, prices in the agricultural sector was up in June.

Post by Pang Ru Yee

Monopolistic Competition - Victoria Loh

What is monopolistic competition?

The most common example of monopolistic competition is the Restaurant Industry.

There are a lot of restaurants everywhere, therefore we can conclude that in a monopolistic competition, no are no barriers to entry, therefore it is easy to enter and exit the industry which results in many buyers and sellers.

These are the two most popular fast food restaurants around the world:

           

McDonald and Kentucky Fried Chicken both offer burgers, fries, a variety of drinks, fried chicken, dessert and etc.

Almost the same, But NOT the same

These restaurants sell differentiated products in the sense that they are close substitutes but not perfect substitutes. They may vary by with prices, quality, taste, texture, services, environment and etc.

We set our own Prices

McDonald and Kentucky Fried Chicken are price makers. In order to stay in the industry, they cannot set their prices too high nor too low. They must always monitor their competitors. In this case, MCD and KFC must always monitor the prices set by each other.

$$$ are needed to Advertise

MCD and KFC need to constantly compete with each other. Hence, a lot of advertising is needed to ensure that customers are updated about their new products, breakfast/ lunch/ dinner discounts. But the cost for advertisement is never cheap and is needed to be taken into consideration as their expenses.

Monopolistic competition will either make profit or losses in the short run, but in the long run there will be normal profit.

Post by Victoria Loh

Malaysia is facing NATIONAL DEBT? - Yu Jo Yee -

NATIONAL DEBT? We owe other countries ?!!!

In the year 2012, Malaysia government debt stood at RM 470 billion !!!

Although Malaysian always pay Taxes, but national debt NEVER reduce . 

Why citizens are bearing tax but still OWE to other countries !?

-Government spending is exogenous. Thus, Malaysia government spended over budget and lead to budget deficit.

Discretionary Fiscal Policy = Government Spending + Taxing Power 

Concept above shows that apart from increase tax, government must also reduce spending.

California is the real and best example. Two years ago, Californians are facing $25.4 billion deficit. But they are having budget surplus. There are some methods in helping California's economy.

Jerry Brown is the governor of California since year 2011. He cut down the spending of the country, cutting university budgets, holding K-12 education to the minimum and slashing health and social service programs. And he gathered signatures for a ballot initiative to raise income taxes on the wealthy and increase the sales tax by a quarter-cent on the dollar.

Malaysia government should follow those methods to improve our economy. For instance, cut down the expenses on education, healthcare, tourism and others.

While Malaysian can support domestic products, travel in Malaysia, work in Malaysia after graduation etc. Malaysia’s economy may improve by these little contributions.

I hope we can release from the national debt ! MALAYSIA BOLEH!!!

By__Yu Jo Yee

Demand & Supply - Jessica Phang

The Power of Demand & Supply

Demand & Supply defined as an economic model of price determination in a market. It concludes that in a competitive market, the unit for goods will vary it settles at a point where the quantity demanded by consumers will equal to the quantity supplied by producers. It results in an economic equilibrium for price and quantity of a product. The world can have many different many meanings when it come to demands, but demand is simply the various during the period of times. This definition has lead economists to formulate a law that would be able to envelop the basic behaviors of an economy in regards to the price of products, states that as the price of a product falls, the ceteris paribus being equaled, the quantity demanded will increases, include vice-versa. It is very important to note that this rule can be shown as tabular representation such as supply schedule, or graphical representation such as demand curve, which provide an excellent visuals understanding the inverse relationship between the price of a product and the quantity that is wanted by the consumers per unit of time in a given economy.  The demand curve represents the entire demand for a product, whereas a point on the curve represents the quantity of demanded of the goods at one specific price. To illustrate this difference, it can be shown that a change in price of a product will results a change in a point along the curve and the quantity demanded.

A change in overall demand would shift to the overall curve just because of the five

distinct non-price determinants factor.

Taste

Number of buyers

Price of related goods

Income

Consumer Expectations

Substitute Goods

Complementary Good

References to : http://en.wikipedia.org/wiki/Supply_and_demand

Post by Jessica Phang

Oligopoly - Summer Yu Hai Woon

Coca-Cola and Pepsi !!!  Oligopoly?? @@

Isn't everyone like to drink Coca-Cola??

Isn't everyone like to drink Pepsi??

But does anyone know the market structure of them???  >.<

Coca-Cola and Pepsi are two most popular and widely recognized beverage brands in the whole world. They are the predominant carbonated cola beverages. Furthermore, the carbonation of Pepsi has 1 gram less than the carbonation of Coca-Cola.

Oligopoly is applied between Coca-Cola and Pepsi firms. Oligopoly refers to a market structure that there are a few large producers which are mutually independent selling homogeneous products. Basically oligopoly would only exist when there is only small number of firms in an industry that they must consider the reactions of the rivals in formulating its price policy. 

The entry barriers in oligopoly structure are high which is difficult to enter the industry. This high entry barrier is present due to copyrights, patents, advertisements and also economies of scale (EOS). 

In my opinion, both of them are able to gain more subscribes due to mutual independence of their pricing policy and non-competition such as brand loyalty. This is because both Coca-Cola and Pepsi firms are facing mostly the same of their products.

Reference to : http://www.wikivs.com/wiki/Coca-Cola_vs_Pepsi

Post by Summer Yu Hai Woon