Oligopoly

Oligopoly: Maxis Digi and Celcom

 Malaysia is oligopoly structure nowadays. They are largely compete on differentiate. Maxis, Digi and Celcom are one of the Malaysian oligopoly cellular communications industries with high entry barriers, mainly due to government licensing restrictions and high exit barriers due to huge capital investments. However, frequent technology changes could potentially. The market share is with intense price-competition as the market gets more saturated. Non-price competition is also intense, mainly through advertising. The 3 large cellular communication firms (Maxis, Digi and Celcom), individual market shares are used to measure market power.

However, as price-competition escalates, other cellular communication industries are pricing closer to marginal costs as evidenced by the steady drop in ARPU over the past few years. Consumer satisfaction is high for Maxis though consumers are seeking for even lower communications charges and greater geographic coverage. Maxis is currently doing a good job and should continue to push ahead with its plan to allow greater customer choice.

This picture is shown the different promotion plan for Iphone 5

In my opinion Maxis, Digi and Celcom should also monitor for deceptive advertising, SMS contests and voting to collusive behavior through price-signaling. It is also recommended that Maxis conducts benchmarking against regional and international cellular communication industries on key areas like profitability and returns on equity to determine fair-returns, service quality and technical efficiency to determine the success of its policies in future.

Reference :

http://www.slideshare.net/amiwaleed99/maxis-economonics-assignment

The concept of sarcity

Concept of Scarcity

What is scarcity? Concept of scarcity is the basic economics problem because human has unlimited wants but the resources are limited. Scarcity takes place when people desire more things than available resources can provide.


From the article http://www.chinability.com/chinas_land_and_resources.htm  we can know that the cultivated land in China is getting lesser and lesser. Moreover, and for this article http://www.fao.org/docrep/006/u9095e/U9095E07.htm has clearly shown that the arises of land scarcity.

Nowadays, human needs more land to develop and they need more and more resources. So, they decided to deforestation by chopping down the trees. This causes that all the natural resources are getting lesser and lesser. Scarcity occurred because natural resources are not unlimited.


Fortunately, they have analyzed the problem and soon they decided to carry on reforestation to decrease the rate of scarcity.

Written by Kenneth Lee Ron 0314884

Price Elasticiy

Price elasticity of demand.

http://www.bdlive.co.za/business/retail/2013/07/10/business-day-tv-petrol-price-increase-and-the-effect-on-consumers

The link above tells us about the price of petrol increase. This article illustrated the economic concept of price elasticity of demand.
What is price elasticity of demand?
Price elasticity of demand is a kind of measure of the relationship between a change in the quantity demanded of goods and services and a change in its price. There are three types of elasticity: elastic, unit elastic and inelastic. There are some formulas to calculate the price elasticity of demand(Ed). Such as:

Point Method:
Ed=   percentage change in Quantity Demanded
               Percentage change in Price


Midpoint Method:
Ed=    Change in Quantity    ÷   Change in Price
          Sum of Quantities/2       Sum of Prices/2




When Ed is greater than 1, then the particular goods or services are elastic. When the Ed is equal to 1, then the particular goods or services are unit elastic. And when the Ed is lesser than 1, then the particular goods or services are inelastic.


Graph for Elastic Demand:


When elastic demand, the total revenue of seller will affected by a change in price due to the quantity demanded. For an example: when the price is at $2, the total revenue is $60 and when the price is increase to $3, the total revenue decreases to $30. This is because when the prices slightly increase, the consumers can just switch to the other substitutes.


Graph for unit elastic demand:

When unit elastic demand, the total revenue of seller will not affected by a change in price due to the quantity demanded.


Graph for inelastic:

When inelastic demand, the total revenue of seller is insensitive due to the price change.

• From the link on top, the article is related to inelastic demand. Petrol is a necessity for everyone on earth who has a vehicle. So when the price of petrol increased, the quantity demand for petrol will not decrease much because everyone needs petrol to pump in their vehicles. Without petrol, all the vehicles are just a piece of steel. Hence all the people will choose to tighten up their wallet and pay the expensive petrol fees.

Written by Kenneth Lee Ron 0314884

Monopoly

The Monopoly company in Malaysia - Tenaga Nasional Berhad ( TNB )

  Tenaga Nasional Berhad is the only company that supply electricity in Malaysia. Until now, Tenaga Nasional Berhad is the only electricity supplier directly to consumer. There are many reasons that why TNB is still standing as a monopoly in Malaysia. First of all, to run a electricity supplier business, it involves a huge initial investment to build the power plants and purchase raw materials.

                                                       Tanjung Bin Power Plant

                                                Manjung Coal Power Plant

  Secondly, even if there are strong companies would have enough capital to build the business, but they still can't enter into the electricity industry. It is because, TNB own the only license that has been given from government. Hence, there are chances for competitors to step into the industry. Logically, just think of it what will happen if there are two electricity supplier in Malaysia? If there are two electricity supplier in Malaysia, they two company will compete with each other with their prices and of course the customer will definitely choose the company that offer lower price. Besides that, there will be increasing of power plant and transmission tower in Malaysia and it brings the destructions to the environment.l The worst is how is the company going to connect the cables to the household which chooses different supplier? Hence, the government only give the license to TNB to maintain healthy market.

Supernormal Profit Graph

Tenaga Nasional Berhad in monopoly in Malaysia. Hence, it is a price setter. The company would set their prices at point P or above ATC curve to earn supernormal profit all the time.

Recently, from the press statement that released on 18 April 2013

The 2nd quarter 2013 financial performance was sustained with stable generation costs whereby during the quarter the average coal price was recorded at USD84.7/mt as compared USD84.4/mt recorded during the 1st quarter financial performance 2013.

Comparing the Group’s performance for the first six months period of FY2013 against the corresponding period in FY2012, revenue increased by 3.8% from RM17,322.6 million in 1HFY2012 to RM17,981.0 million for the current period. This is in line with the increase in demand of 4.6% in Peninsular Malaysia. However, operating expenses decreased by 5.4% mainly benefitted by lower average coal price.

The average coal price during the 1HFY2013 was recorded at USD84.6/mt as compared to USD109.3/mt in 1HFY2012, reflecting a 22.6% decrease over a period of 12 months. This, coupled with the strengthening of the Ringgit against the USD of 1.1% further enhanced the savings in generation costs during 1HFY2013.

Resources
http://www.tnb.com.my/tnb/application/uploads/quarterlyresults/e2b509b2dcac20c8b7b20c25c2530cec.PDF
http://www.tnb.com.my/

Demand And Supply

Demand and Supply

This video shows that how the demand curve and supply curve works, how the other factor exclude price can affect the curve, do click on it to watch.

Take the IEA’s latest Oil Market report:

Global oil product demand is expected to rise by a robust 2.5% to 88.2 mb/d in 2008… Non-OPEC supply in 2008 is forecast to reach 51.0 mb/d.

Supply and Demand

There is an inverse correlation between price, and quantity demanded. If this is the car market, then at lower price levels, people who couldn’t afford to buy cars, and some families which owned one car, will spend on a second. Demand varies with price. And the same is true of supply:

If the price rises, so will supply. Supply is a function which is at a certain time, at a certain prices that a firm willingly produce the product.

The Oil Shocks of the 1970s

This model can be applied to the oil price shocks of the 1973. Following US support for Israel in the Yom Kippur war, the newly founded OPEC announced it would stop selling oil to the US, and would restrict its overall oil output. Because OPEC supplied so much of the world’s oil, this had the effect of changing the shape of the supply curve. In other words, for any given price level, there would be less oil supplied:

As can be seen from the chart above, this restricting of supply caused the blue supply curve to move to the left, and – as the market must clear – the price rocketed. Dropping out of theory and into practice, we see that this is exactly what did happen. The price of Saudi Light oil jumped from under $3 a barrel in 1971 to almost $40 by 1980.

Other Short-Term Changes to Supply and Demand Curves

The rise of emerging markets has also changed the supply and demand dynamics. As China, India and the like industrialize, and their emergent middle classes buy cars, then the demand curve moves to the right. For any given level of price, more oil is demanded. As the chart below shows, this has exactly the same impact on the clearing price of oil as does reducing supply: the price moves, and sharply.

The article above is written by Tham Zi Yang 0315350

Monopolistic Competition

Monopolistic Competition: Panasonic competitive with other brand

What business are Panasonic in? How much of revenue are Panasonic generating from his category? What is their market share? What are their competitive?

Panasonic is known as monopolistic competition, which mean they are an independent industry. They have over 4000 state and local customer across the country which means they have large number of sellers and buyers. Panasonic own over 65% of the Public Safety Market. Besides, Panasonic have the lowest failure rates for mobile laptops in the industry and they do not sell direct. Their product sold is differentiated and has many close substitutes and the product has many close substitutes. The price value is controlled by someone, which means they are price maker. Their brand has differentiated products such as name, function, and packaging, that always competitive with other brand. Thus, this can make their demand curve is flat as it is fairly elastic, if their products are close but not perfect substitutes.

There are 5 leading competitors compare the brand and price with Panasonic. The chosen product is camera and its 5 major competitors are Sony, Samsung, Canon, Nikon, and Olympus. This will make the brands more elastic since there are too many brands with different price to give customer choose. An elastic response due to price change is because there are a lot close substitutes supplied by other brands in the industry.

Digital Camera global market share in year 2010

In my opinion Panasonic must make an informative advertising. Thus, they can provide consumers

with information on the product or service, as well as build awareness and initial demand of their product. Unknowingly, Panasonic can largest their firms and giant super normal profit in short run.

This article is written by Dan Jian Hong 0315761

Refrence from http://www.slideshare.net/9976/panasonic-corporation

Market Equilibrium

Market equilibrium

The article was originally taken from the Financial Review website which was published on the 21st of September regarding the launching event of Apple's iPhone 5 and its sales on that day.
Apple officially launched their iPhone 5 on the 21st of September 2012. There were a lot of people who queued up the day before in order to get their hands on the new gadget. With that being said, the quantity demand for an iPhone 5 was very high as proved in the article with about six hundred people queuing to get the gadget and each customers were limited to get a maximum of 2 phones only. When quantity demand exceeds the quantity supply, shortage will occur. This will force the price of an iPhone 5 to increase in order to meet the market equilibrium, if the price of iPhone 5 increases, the quantity demand will decrease. The quantity demanded and supplied will move upwards along the line to meet market equilibrium.

Unfortunately, the iPhone 5 considered as luxury good as the price of the product decreases, the quantity demanded for iPhone 5 will increase which will also lead to an increase in total revenue. With that being said, the elasticity of demand of the iPhone 5 will be elastic. In order to meet the market equilibrium, Apple would have to decrease the price of iPhone 4s. This way, the quantity demand of an iPhone 4s will increase as the price has gone down and the quantity supplied will also decrease due to lots of people purchasing the iPhone 4s. Again, graphically explained, the point of the quantity demand and quantity supplied will move downwards along the line in order to meet the market equilibrium. I predict that a black market will occur. In every production of an Apple product, people from other countries would purchase a few units and sell them at a higher price back in their own country as Apple has not officially launched the product in the respective countries.

The article above is prepared by Tham Zi Yang 0315350