Demand
Demand is the desire and ability to consume certain quantity of a particular good or service at certain
prices at particular point of time. Demand curve is a graph that uses to record the demand of the market. (Flynn et al., 2012)
Law of demand
Demand is usually downward sloping because there are inverse relationship between quantity demanded and
price. In ceteris paribus, if consumer willing to purchase more goods (quantity
demanded increase), the price of the particular goods will decrease;
verse-vice. Ceteris paribus means all other things or factors are constant or
unchanged.
“In 2012, the chicken
price in Malaysia is RM6.80 per kilogram which is lower than the chicken price
in 2011 which is RM7.20 per kilogram.” (NewStraitsTimes, 2012)
From the graph we realize the chicken price in 2012 is lower than 2011.
This is a good news for people because when chicken price decrease in 2012, the
quantity demanded of chicken will increase. Because of the price is cheaper in
year 2012, people don’t need to use high price to purchase chicken as year 2011,
that`s mean they are afford and willing to buy chicken compare to the substitute
product. In a simple word, people are willing and more ability to purchase and
consume particular product if market price is decrease, so the quantity
demanded of will increase.
Movement along of
demand curve
If there is change in price of the good or service, movement along to
left or right of the demand curve. It referred to the change in quantity demanded. Other factors are
remaining unchanged. (Flynn et al., 2012)
In the graph, the demand curve move along to the right because price
of chicken decrease while quantity demanded increase; in ceteris paribus condition. We assume point
A represent year 2011, point B represent year 2012. As we can see, the price of
chicken decrease from RM7.20 to RM 6.80, the quantity demanded increase from Q1
to Q2.
Movement shift of demand curve
If there is change in other factors such as level of income, taste and preferences, expectations
about future prices and price of
related goods (substitute goods and complementary goods) which cause the movement shift to left or right of the demand curve. It referred to the change in demand.
The income level and price of substitute goods will
decide whether people going to purchase chicken then cause the change in the
demand.
“Malaysia is hard to
be one of the high-income economy country because Najib’s NEM does not dump the
NEP policy.” ( Dr. Chen Man Hin, 2013)
Demand of chicken will decrease due to the level of income is decrease.
People cannot afford to consume chicken due to the decrease of income level so
even the price is constant; the quantity demanded of the chicken is decrease.
Therefore, the demand curve will shift to left, when the level of income is
decrease.
“Chicken has a lot
of substitute goods” (hubpages,2008)
Price of substitute goods increase when
the price of chicken decrease in year 2012. People willing to consume chicken
compare to other meats, such as pork, beef, or duck because chicken is
more affordable. It is a positive relationship between price of the
chicken and quantity demanded of its substitute. When price of the chicken
decrease, quantity demanded of the substitute product will decrease. Thus,
the demand of chicken will increase due to the price of substitute goods is increase. Therefore, the demand
curve will shift to right.
As we can see from the graph, the demand curve affect by income effect is D3, demand curve
affect by substitute effect is
D2 and demand curve does not affect by any effects is D1. People are spending difference price
to get the same amount of product at difference demand . D3 is move to left from
D1 means less people spent money on consume chicken due to decrease
of income level while D2 is move to right from D1 means more people
spent money on consume chicken due to increase in price of substitute.
Supply
Supply is the quantity of goods and services that producers or firms
willing produce or offer for sale at particular time or place at given
price, with all other factors being held constant. Supply Curve is a
graph shown the relationship of quantity supplied and price of product
that businesses are willing to sell.
Law of supply
Supply is usually upward sloping because there are positively relationship between quantity
supplied and price. In ceteris paribus, if producer willing to
produce or sale more in particular goods (quantity supplied increase), the
price of the particular goods will increase; verse-vice.
According the law of supply, the quantity supplied
for chicken will decrease due to the decreases in price of chic ken from year
2011 to 2012. Therefore, the quantity supplied of chicken in 2012 will lower
than the quantity supplied of chicken in 2011. In a simple
word, firms are willing to supply less chicken in market price at year 2012
compare to 2011; because they hard to cover their marginal cost of production.
Movement along of supply curve
If there is change in price of the good or service, movement along to
left or right of the supply curve. It referred to the change in quantity supplied. Other factors are
remaining unchanged. (Flynn et al., 2012)
In the graph, the supply curve moves along to the left because price of chicken
decrease while quantity supplied decrease; in ceteris paribus condition. We assume point
A represent year 2011, point B represent year 2012. As we can see, the price of
chicken decrease from RM7.20 to RM 6.80, the quantity demanded decrease from Q2
to Q1.
Movement shift of
supply curve
If there is change in other factors such as prices of factor of
production, technology, weather and price of
related goods (substitute goods and complementary goods) which cause the
movement shift to left or right of the supply curve. It referred to the
change in supply.
factor of production (feed) and weather will cause the change in chicken
supply in the market.
If prices of factor of production used to
produce a good decrease, the minimum price that producer is willing to accept
for producing each quantity of that good will decrease, then the supply curve
will shift to left; vice-versa. As we know,
feed is one of factor affect the chicken price because more feed used by
producer, cost of production will be higher. Therefore, producer will eliminate
feed used to reduce cost of production then price of chicken will decrease.
“A
searing heat wave in the region is affecting chicken feed and causing the fowl
to lose weight, impacting the price of the meat in the market.” (Patrick
Lee, 2013)
If the weather is bad, chicken will grow slowly, and smaller size so chicken
won`t sell in a good price. Besides, death rate of chicken will increase during
bad weather because chicken will get infected by bacteria or virus and eat less.
Therefore, producer need to spend extra money to
buy vaccination to cure chicken disease and feed supplement for chicken to grow
in good condition. All extra expenses will cause increase costs of production, thus decrease in the supply of a chicken. Therefore, supply curve shifts to the left.
“I
started exploring ways to cut feed costs and ended up on techniques that not
only eliminate feed costs, but also provides a far higher quality of feed! My
goal was to cut my chicken feed bill by 80% or more.” (Weaton, P. 2012)
Look at this: http://paulwheaton12.wordpress.com/2012/06/25/what-to-plant-so-you-dont-have-to-buy-chicken-feed-ever-again-2/
With advances in technology, producer is not
concern in weight of feed there uses for chicken but the nutrition in feed that
can boots up the chicken. So, producer use less amount of improved feed for
chicken but the result of chicken is same with using big amount of normal feed.
That`s mean, the advances in technology make producer able to improve the
quality of feed so they can use less feed for chicken. Today, the producer can
produce more chicken with lower cost of production because the used of feed is
reducing. The lower costs of production cause increase in the supply of a chicken
therefore the supply curve shifts to the right.
As we
can see from the graph, the supply curve affect by weather is S3 and supply curve affect by technology is S2 and supply curve does not affect by any effects is S1. Producer spending difference price
to
produce same amount of product.
Price ceilings
Price ceilings are price controls and adjustment methods of government
to market price.
“Ministries to look
into reported chicken shortage” (Borneo Post Online. 2013)
Look at this: http://www.theborneopost.com/2013/04/09/ministries-to-look-into-reported-chicken-shortage/
When chicken shortage happen in market, the price of chicken will
increase then it will become a burden for people. Therefore, government
had set the price of chicken lower to make sure more people are able to consume
chicken and seller can earn more money. This is consider a price adjusting
method which is price ceiling.
"Ceiling prices for 19 popular Hari Raya items will be imposed between Aug 12 and 26." (The Star, 2012)
http://thestar.com.my/news/story.asp?file=/2012/8/5/sarawak/11799896&sec=sarawak
Price Ceiling
Price ceiling is set below the equilibrium price by the government for particular goods to make it illegal
to charge at price higher than a specified level (maximum price).
The purpose of setting price ceiling is to help customer able to purchase basic
or essential item that were previously unaffordable.(Flynn et al., 2012)
In Malaysia, government will always set a price ceiling to price
of chicken during festive seasons Hari Raya Aidilfitri and Chinese New Year.
Government set a maximum price for the chicken because they believe that the
quantity demanded of the chicken will increase during the time. This is
basically to prevent the consumers from the manipulated price by immoral
sellers, therefore the consumer able to purchase the chicken with an affordable
price.
But price ceiling is not considering as long term
strategy for a country because it cause customer to get lower quality
product and it creating a shortage for certain product. Producer will get
less profit because of the price ceiling set lower than the market price for a
long time. To cover the loss profit producer will sell lower quality
product for customer. At the end, customer will be the loser in the case
because they get lower quality product with paying certain amount to producer.
Besides, it will cause the shortage of chicken supply because the quantity
demanded has exceeded the quantity supplied. And the chicken supply
market are limited now so the customer may need to waste time and money to
search the available market. This is the deadweight area we called, this is not benefit to both producer and buyer side.
At the end, government is forced to remove the price ceiling because it may cause the whole industry business unable to be survives. As, producer unable to to cover their cost of production and could not make a profit then affect the chicken supply to customer. Government remove the price ceiling to ensure consumer have sufficient supply
of chicken and eggs, government remove the price ceiling immediately.
References:
Ceiling
prices set for 19 popular Aidilfitri items. (2012) The Star. 05 August 2012.
Flynn, S.M., McConnel, C.R., Brue, S.L. (2012) Economic. Global Edition. America, New York: McGraw-Hill
Hin, C.M. (2013) Hopes for Malaysia to be a high-income economy are not bright because Najib’s NEM does not dump the NEP policy. Lim Kit Siang For Malaysia.02 March. Available from: http://blog.limkitsiang.com/2013/03/02/hopes-for-malaysia-to-be-a-high-income-economy-are-not-bright-because-najibs-nem-does-not-dump-the-nep-policy/ [Accessed 7 June 2013].
Hin, C.M. (2013) Hopes for Malaysia to be a high-income economy are not bright because Najib’s NEM does not dump the NEP policy. Lim Kit Siang For Malaysia.02 March. Available from: http://blog.limkitsiang.com/2013/03/02/hopes-for-malaysia-to-be-a-high-income-economy-are-not-bright-because-najibs-nem-does-not-dump-the-nep-policy/ [Accessed 7 June 2013].
Ministries to look into
reported chicken shortage. (2013) Borneo
Post Online. Available from: http://www.theborneopost.com/2013/04/09/ministries-to-look-into-reported-chicken-shortage/
[Accessed 7 June 2013].
Patrick,L. (2013) Price of poultry on
the rise as searing heat wave affects chicken feed. The Star. 04 June 2013.
Price of chicken lower this year. (2012) New Straits Times.
Available from: http://www.nst.com.my/latest/price-of-chicken-lower-this-year-1.124605 [Accessed 7 June 2013].
Wheaton,P
(2012) Practical Permaculture. Available
from: http://paulwheaton12.wordpress.com/2012/06/25/what-to-plant-so-you-dont-have-to-buy-chicken-feed-ever-again-2/
[Accessed 7 June 2013].
Which
is best meat, lamb, beef, pork, or chicken. (2008) Hubpages. Available from: http://elfear.hubpages.com/hub/Which-is-best-meat--lamb--beef--pork--or-chicken [Accessed 7 June 2013].
