Thursday, 22 November 2012

The Starving Millionaire





     Zimbabwe is a country with a population of about 13 million people in Africa, bordering on South Africa, Mozambique, Malawi, Botswana and Zambia. in Southern Africa, Mozambique and Zambia.








People in this country are facing difficulty in living. Having a death rate which ranks them at 13th in the world, the population is just not sustainable, causing Zimbabwe to experience a negative population growth, despite the fact that they have a fairly high birth rate. This is due to a failing the health care system. One of the causes of poor health condition in Zimbabwe is the high HIV infection rate and and 2011, there were 33.7% of the population aged 15-49 suffering from HIV. Zimbabwe has over a million orphans due to the death of their parents caused by the HIV epidemic and to avoid death from starvation, they have no choice but to rely on food aid from the World Food Programme. This phenomenon is a direct cause of the country's poor economy.
       




Zimbabwe is currently holding the position of the second highest inflation rates in the world. In 2009, the inflation rate of Zimbabwe reached the highest rate of the world of 24,000% compared to Myanmar. The reason for this is because the amount of money in economy is not supported by the growth in the output of goods and services. Printing money without reservation by the government of Zimbabwe will cause hyperinflation to happen. The intensive fall in money value in Zimbabwe causes their currency to lose its function as a medium of exchange completely, rendering the Zimbabwe dollar virtually dead.






Just imagine you have to bring so much money out just for an one day outing. 



NO KIDDING!







Zimbabwe Dollars
The Zimbabwean dollar is experiencing a rapid decline in value over the past eight years, the price of goods double at least once a day. Zimbabwean dollar has fallen out of everyday use, even the largest dominant of the Zimbabwean dollars was not able to buy a loaf of bread. 

There are once severe cash shortage because the government can't afford to print bank notes to keep up with the pace of the inflation.


Try notice that there is an expiry date on the note that states :" on or before 31st December 2008". This is because of  the rapid change in the inflation rate and the increasing price of the goods and services in Zimbabwe.





The monetary authority should be responsible by not borrowing money to pay all its expenses and funding quasi-fiscal activities to prevent the country from facing hyperinflation. The decreasing currency will also affect the crisis of confidence that result of the rejected of foreign investment. The U.S and Britain have partially withheld financial support for Zimbabwe by helping them in reforming government before any additional aid is offered.




References:

  • http://www.africaecon.org/index.php/exclusives/read_exclusive/1/2
  • http://www.newzimbabwe.com/pages/inflation180.17386.html
  • http://www.cato.org/zimbabwe



Prepared by: Chong Hui Yi
Student ID: 0311644

                                                                                              















Market Structure: Perfect Competition

Perfect Competition occurs when there are many sellers and buyers in the market. New firms in the perfect competition are able to enter the existing industry easily whereas old or existing firms are also able to exit or leave the industry easily. There are no barriers to entry into the industry. The perfectly competitive firms tend to produce and sell  identical or undifferentiated goods and services to the consumers. The firms and consumers are well informed about the prices of the goods, quality of the goods and the skills required to produce the goods. Existing firms are unable to control new firms in perfect competition. A firm in perfect competition cannot control and influence the changes in selling price of the goods , instead it must accept and take the equilibrium market price. Hence, the firms in perfect competition are also called as price takers. The demand for perfectly competitive firm’s output is perfectly elastic because each firm’s output is a perfect substitute for the other firm’s output.

A firm in perfect competition can affect the economics in many ways. There are many examples of firms in perfect competition industry. One of them is the automobile industry. They have major impact on the economy because of their large production of automobile every year that has contributed to rapid economic growth. Besides, automobile industry has provided many career opportunities to the people. This is because the automobile manufacturing factory requires a huge number of workers to do factory work. An example of the automobile company is Toyota Motor Corporation. They have introduced hybrid cars such as Toyota Prius and Toyota Prius C that uses green technology to reduce environmental pollution. This has successfully attracted many customers who love and want to preserve their environment.






In a nutshell, our economy is greatly influenced by the automobile industry. It is growing very rapidly in our modern era of technology.


References:


Prepared by: Ngen Chang Wang
Student ID: 0311885



Market Structure: Monopolistic Competition

Monopolistic Competition can be defined as a market that has a large number of sellers. Monopolistic Competition is also known as a type of imperfect competition. It has many monopolistically competitive firms unlike monopolist which has one firm only. Besides, there are product differentiation and variation in monopolistically competitive firms. The products produced are similar to each other but they are not homogenous or identical to each other unlike perfect competitive firms that produce homogeneous or identical products. Apart from that, monopolistically competitive firms have no barriers to entry. This allows them to enter and exit the industry easily. Monopolistically Competitive firms have some control over price. Therefore, they are also known as price maker. Monopolistically Competitive firms have a fairly elastic demand curve because of their product differentiation and many close substitutes.

There are many examples of  Monopolistic Competition. One of the examples is Kraft Foods Group. Kraft Foods Group has large influence to the economy. Everyone loves the delicious products produced by Kraft Food Group. This has created  many job opportunities to the public to maximize economic profits for the company. This is because both the employees and consumers receive profits when the company has employment. The quality of our lifestyles has also improved due to the positive economic growth as a result of the employment opportunities and family’s income. Moreover, Kraft Foods Group is very different from other food and beverage company. This can be clearly seen when Kraft Foods Group contribute to the society and economy besides making a lot of profits.
In conclusion, kraft foods group has contributed a lot to the growth of our economy. It has produced many delicious foods and snacks to the consumers.
                      
                                                                                                       

References:


                                                                                                         Prepared by: Ngen Chang Wang
                                                                                                             Student ID: 0311885

Oligopoly Firms in Malaysia

These are examples of Oligopoly firms



There are powerful competitions within the telecommunication firm in Malaysia such as Maxis, Celcom, and Digi. As there are healthy competitions within these firms, the profit margins earn by each firm will reduce. Since there are a few large producers are competing with each other, telcos will reduce the price to gain the market share to increase the profitability. For example, Maxis launched a cheaper prepaid and IDD packages among the foreign workers with attractive price rate. Celcom launched the Celcom First Voice Plan to help the group expand its subscriber base. However, it was analyzed that in the prepaid market segment has a high churn rate where there is no customer loyalty and the customers are likely to switch to different operators.

Compete?
Cooperate?


  or

          




               



As seen on the summary above, Maxis, Celcom and Digi are considered as large sellers a competing with each other. These 3 of these telecommucation firms are considered as oligopoly.  Oligopoly is also known as the competition among the few firms. These firms have set higher barriers to entry to prevent entry of the new firms because they are so competitive among them. However, they are mutual interdependent with each other over controlling price. They are so small that each of the firms has to be aware of the reactions of their competitors in making the price policy. However, a dilemma faced by the oligopoly firms is to decide whether to compete or to cooperate. If Maxis, Celcom, and Digi are cooperating together, a larger monopoly can be formed and the firms and they will able to enjoy more profits.
           
            In my opinion, if Maxis, Celcom and Digi cooperate together, the revenue of the firm will increase. Thus, they will also provide a better customer service to the customers. As customers are satisfied, they will stick to the company causing the firm to make more profit. Besides that, as firms cooperate together, there will be larger investment where the average cost reduce because there will be a larger output quantity. Other than that, there is a disadvantage where the firms are merged together, there will be an excessive labour. An excessive labour will cause the firm will reduce the staffs working in the similar field. By doing this, the firm can save up a lot of staff cost. Therefore, many people will start losing their job. If they compete, each of the firm must provide good services and competitive price. In addition, the firms are also required to provide additional services to attract the customers. What do you think? Is it better to compete or to cooperate? 

Reference of article:


Prepared by: Lim Kye Lyn
Student ID : 0311892


 

The story of government price control and the H1N1


Commuters in Mexico, where the crowd is wearing face mask in the prevention of swine flu.

Anyone here still remember about the outbreak of H1N1 virus (swine flu) in year May 2009? The rising number of deaths and the infected people in the nation due to such pandemic has caused the public to be more aware of being hygienic. The demand of hygiene products such as the antibacterial hand sanitizer, and types of surgical masks has increased rapidly. Seeing such situation as an advantage, many greedy traders took the opportunity to increase the retailing price of the surgical masks; a mask that is usually sold at the price of 50 cents has increased to RM5. Some people even bought masks in bulk and repackage them for reselling. To protect the privilege of the people of the nation as consumers, the Malaysian government imposed a temporary price ceiling to control the price of surgical masks.



The most common type of surgical mask.

Firstly, the definition of demand is the desire to own anything, the ability and willingness to pay for it whereas a shortage or an excess demand happens when consumers are willing to buy more than producers are willing to sell. From here, the market effect of growing demand for surgical masks is due the H1N1 virus that leads the public to become aware of being hygienic. As all people are concerned and want to protect themselves from this pandemic, the demand for it has dramatically increased before the supply of it can be increased.  Therefore, this rapid increase of demand with unchanged supply has theoretically shifted the demand curve to the right and thus increasing the equilibrium price of it.

(photo from mbaecon.wikispaces.com)
Demand curve shifts from D1 to D2 due to higher demand, while supply curve is assumed to remain the same as the increase of demand is too rapid that supply can't be increased at the moment. Therefore, it brings to a higher market equilibrium price. 

However, the demand for the masks has increased so greatly that the government had to set the price below its equilibrium as to protect the consumers of low financial ability when purchasing surgical masks. Price ceiling is a government-imposed regulation that makes it illegal to charger a price higher than a specific price. The government decided to impose such price ceiling as producers are still found to receive fair profit after the study on production cost of masks. Under the Price Control and Anti-Profiteering Act 2010, errant traders or suppliers who overcharged might get a fine of up to RM15,000 or a maximum of two years’ jail or both upon conviction. A price ceiling is imposed due to the reason that the surgical masks should be financially affordable to everyone, and it is also to prevent the citizens to be taken advantage of by the traders as many have been selling a mask at cost of 30 cents at RM5 or above, which is 16.7% higher than its cost.

As a result of the price ceiling imposed, where the price is set below the market equilibrium, a permanent shortage occurs. This is according to the law of demand that when a price falls, the quantity demanded rises. It is obvious that there would be a shortage of the masks since before price ceiling was introduced; the masks are already excessively demanded. The demand of the public for the masks has then reduced as news about lesser cases of H1N1 is reported.



Students are given free face masks. Some schools have to be closed temporarily due to the spread of the H1N1 virus among the students.

In my opinion, the imposition of price ceiling on surgical masks that functions to control the price is definitely a good idea to enable that everyone can purchase them. However, the price ceiling imposed is only protecting the privilege of the consumers to not buy masks at such expensive price compared to its cost. It doesn’t help to solve excess demand as it can only be solved by increasing its selling price according to the law of demand. Therefore, to really get rid of the shortage of masks, an increase in the supply of it will be more effective. There goes this saying of the Malay proverb “prepare the umbrella before it rains”, everyone should be vigilant to the changes of health-related issues so that prevention can be done. Well, more surgical masks can be prepared for selling if we have discovered such need due to the pandemic earlier, right?

Reference:



Prepared by: Loh Khei Ying
Student ID: 0311978

Astro, the only pay TV firm in MALAYSIA?


As seen in Malaysia, Astro is one of the pay TV operator with the given license for 20 years. This situation is different from the other countries with has different operators which are offering with different types or rates. By comparing India with Malaysia, there are tv operators in India offering up to 155 channels at the price RM9.17 whereas in Malaysia, Astro is only offering 3 mini packages which include 55 channels at the price RM 64.61. However, Astro subscribers have to pay last payment charges, reinstallation charges and servicing charges. Other than that, Astro repackaged and increase the price every 2 years.

What is monopoly? Monopoly is a market structure which a single firm produces a particular goods and service. There are few types of barriers to entry such as patents/copyright, economies of scale, large initial investment, government directive and ownership of scarce raw materials. Based on this article, Astro monopolize the market of pay TV operator in Malaysia. Astro is the price maker and there are no competitors. This gives a disadvantage to the customers where they are not allowed to change to another firm because there are no close substitutes in Malaysia besides Astro. It is used to have competitors but due to the poor services that the other firms provide, they are forced to shut down the company. Besides that, Astro keeps potential rivals by setting barriers to entry where Astro has a license from the government which are strictly prevent other firms from entering the industry.

What will happen is Astro continues to monopolize the market?  If Astro continues monopolized the market, there are going to be lesser and lesser viewers. This is because they have the ability to raise its price without losing the demand of its product. Moreover, customers have a lower income rate could not afford the price of TV packages which are set by Astro. With that, Astro will make a lesser profit compared to the previous year. However, the government should open up the market and give more licenses to other operators so that there will be healthy competition. By doing this, there will be benefits for the consumers as they will have more options. Thus, consumers are able to subscribe to different operators which provide different types of programs. Unlike phone companies where they are oligopoly competition, the customers will be able to switch to another company once they are not satisfied with the current one. To wrap up, there should more pay TV operators so that there will be a good economy of the country and more job opportunities for the people.

Prepared by: Lim Kye Lyn
 Student ID: 0311892

Wednesday, 21 November 2012

iPhone 5 is expensive........or not?


Why is iPhone 5 so popular despite of its expensive price? 


Apple's iPhone 5 and its strong competitor's Samsung Galaxy SIII. 
What makes iPhone 5 stands out from the crowd? 

Since the long-awaited release of iPhone 5 by Apple – the top-selling smartphone among the other brands, Apple announced that the demand of the public for it has exceeded its initial supply unexpectedly. Due to that, customers that can start to pre-order the smartphone of the year since 14 of September have to wait until October to finally lay their hands on it. As comparisons between the sales of all the iPhones released by Apple, it is found that since the release of its first iPhone on June 2007, the selling rates and speed of their following iPhones is constantly increasing that in the first 24-hours of taking preorders iPhone 5, more than 2 million of iPhone 5 are sold.

The new iPhone 5 is undeniably a smartphone that functions really well, however, other competitors such as Samsung and HTC also introduced smartphones of similar functions. Therefore, its barely about functionality of the phone that causes its popularity among the public. Before we step into deeper, let me explain some terms to be used here. The definition of price elasticity stands for the sensitivity of the price of a product by the consumers. This means how strong is the influence of price to a customer while purchasing and it is generally divided into three major types:

- Elastic demand, where a change in the price brings a big change in the quantity demanded.

- Inelastic demand, where a change in the price brings a moderate change in the quantity demanded.
- Unit elastic demand, where a change in the price brings an equal change in the quantity demanded.

Now, the reason why iPhone 5 can have increasing sales and popularity in despite of the increase in the price for every generation of the iPhone is because the customers of Apple are less elastic to the price of the smartphones. This means that the price of iPhone 5 is not an extreme issue to the customers in making their purchasing decision.

Why is it so? There are a few determinants that can influence the customers to be more willing to pay, or to be more insensitive of the price for iPhone 5.


Pageview from Apple's official website on the date of release.

This thing is due to the fact that the public now views smartphones as a necessity rather than a luxurious good even though its price is relatively high. Before the introduction of smartphones, the requirement on a phone is the enabling of calls and messages. However, the introduction of smartphones and its extraordinary functions compared to the normal cellphone causes the norm and view of society to treat smartphone as a daily essential. No one knew that the influence the revolution of the technology, the touchscreen could be such a big issue to change the society’s view. Since its becoming more common and people think iPhone is a need instead of a want, it becomes a fairly elastic demand and people is more willing to pay in obtaining this product.

Besides that, the availability of comparable substitutes is another factor that plays a great role in causing the customers to purchase this smartphone. The attention grabbed from that audience is not purely on the ‘fans‘ of the brand Apple, however, it has also gotten attention from users of smartphones such as Blackberry and Android. In the sector of smartphone manufacturers, brands that are of the standard in terms of their popularity are very little. The famous competitors in the market of Apple smartphones include the Blackberry, HTC, Windows and Samsung.  Therefore, it can be concluded that the audience with similar requirements on smartphones will only consider these few brands listed. From this small variety of smartphones and the added advantage that iPhone receives great review from customers, people will put it on top of the list even though it is more expensive.

Lastly, the purchase and owning of iPhone is now becoming a trend. It is viewed as a buy that shows the personal preference and social status of the customers’. As mentioned in the article, “Still, analysts expect customers to line up days in advance at Apple stores to purchase one of the new black or white phones, just for bragging rights to say they got it on release day.” From that, it is clear that many people are concerned of the ability to show off especially with the transparent social websites such as (Facebook and Twitter) nowadays. Thus, the behavior and the attitude of the society that think being on trend is more important instead of the price of the product causes them to be less elastic of iPhone’s price.

As we come to the ending of this post, I think all that the popularity, the amount of sales that is gained through the introduction of the new iPhone 5 is definitely not solely due to its functionality. As we live in the modern era of technology, it is understandable for the customers to feel inelastic of the price of iPhone as it is viewed as a necessity, especially when the amount close substitute is not high. Since the view of the society of it as a trend is the reason for some of the people in purchasing it as analyzed, I predict that when another trend is introduced and Apple doesn’t get the chance to receive it by chance, the iPhone will not be able to stand as the top-selling phone anymore.


Specifications of all the iPhones released up to Sept. 2012. (Source: Apple Inc.)


 References of article:-