National economy will not be stable if car prices cut, says Nor Mohamed

    According to The Star, based on a nation news it is about “National economy will not be stable if car prices cut, says Nor Mohamed” that return on July 28, 2012 (http://thestar.com.my/news/story.asp?file=/2012/7/28/nation/20120728175936&sec=nation). The strategic director of PKR Mohd Rafizi Ramli said that if the opposition pact won the 13^th General Election, they will reduce the price of car. But according to Minister in the Prime Minister Department Tan Sri Nor Mohamed Yakcop, getting rid of taxes for cars would reduce national revenue by RM7 billion that could affect the infrastructural development. It also will causes the peole who are living in poor conditions cannot boost theor lives because money is not available.

            If they really reduce the price of car, it means that the tax for car will be repeal. It is the only way to reduce the car price. But, is it a good or bad for us if the government really reduce the car prices? If government really reduce the car price, it of course will be good news to us. People no need to buy expensive car anymore and everyone can afford to buy a new car.

            As we know, our country car price is much more expensive compare to the Europe country or United States. All of this is because of the tax or duty charge by government on the car. It makes the car price become higher. But, all of these taxes and duties are the main revenue of government. As what mentioned by our Minister in Prime Minister Department, Tan Sri Nor Mohamed Yakcop, government will straight loss about 7 billion ringgit if we get rid of taxes of car. It obviously shows that government are quite dependant on the money from the taxes of cars. So, I believe that car prices will not reduce at this moment or maybe on the future too.

            Now, we will talk about tax. Everything you earn and everything u buys is taxed. Example is sale tax. Normally sales taxes are added to the bill when you buy something else. Tax incidence is the division of the burden of a tax between buyers and sellers. Normally, when government imposes a tax on a certain goods, sellers will give the burden of the tax to buyers. This is to avoid loss.

            Next, the division of the tax between buyers and sellers depends in part on the elasticity of demand. Which means that if it perfectly inelastic demand, buyers will pay the entire tax whereas if it a perfectly elastic demand, sellers pay the entire tax. A tax drives a wedge between the buying price and the selling price and results in the inefficient underproduction. The price buyers pay is also the buyer willingness to pay, which measure the marginal social benefit. On the other hand, the price seller receive is also the seller minimum supply price, which is the marginal social cost.

            In the other point of view, we can talk about the supply and demand of new cars and also the second hand cars. First, we compare the demand of new cars and the second hand cars. As we know, second hand cars are the substitute good for new cars. If the price of new cars decreases, it will definitely affect the substitution goods which are the second hand cars market. If the price for new car has reduced, nobody will choose to buy a second hand car anymore. It is the common sense view of new car and second hand car. New car quality is much better compare to second hand car and the mantainence fee for new car also lower than the second hand car. So, as long as the price of new car reduced and it decrease the price gap between new car and second hand car, who else will willing go and buy second hand car again? On that time, those second hand car dealers will definitely go bankrupt in a short time.

 

            This is the demand curve for new car. So if the price of new car decrease, it will increase the quantity demanded. This will cause the movement down along the demand curve.

            Next, we will talk about the supply between new car and second hand car. One of the factors that bring change in supply is expected future price. Once the car dealers expected the future price for new car will reduce, the return from selling the good in the future will be decreases and is lower than it is today. So supplier will increases today and decreases in the future to make profit. For the second hand car, the car dealers will hope to sell out the entire second hand car out now before the reduction of new car price started. Thus, in order to produce efficiently, the producers of new car have to meet the equilibrium which is the demand and supply is equal.

            In conclusion, if the price of car goes down, I believe that more people are able to afford a car especially the low income and middle income class. On the other side, although reducing the car prices will benefit us, buy it may still bring some side effect to our country too. It may cause the economics of our country become weak, because of the less total revenue that government earned every year. Without this revenue from taxes, government can’t operate well. Maybe on that time all of the facility in our country will become very poor because government didn’t have money to maintain those things. Besides that, the traffic jam problem will become worst. If everyone can afford to buy a car, it will make the usage of car in our country increases. On that time, everyone will drive their own car to work or go anywhere, no one are willing to use the public transport anymore.

Reduce sugar subsidy: officers to monitor restaurants

        According to MalaysianDegest return on 29 September 2012 17:41 report about "Reduce sugar subsidy: officers to monitor restaurants" (http://www.malaysiandigest.com/news/36-local2/121352-reduced-sugar-subsidy-dtccm-officers-to-monitor-restaurants.html). Regarding to this article, we knew that the government had reduced the subsidy for the sugar by 20 cent and the previous price for sugar is RM 2.30 per pack. This decision was made by our Prime Minister Dato Seri Najib during The Budget 2013. When this decision become effective, will it affect the supply and demand for sugar? On my opinion, the reduction of subsidy for sugar will affect the supply and also the demand for sugar.

            As what state in the law of supply, it mentions that the higher the price of a good, the greater is the quantity supplied. As the price goes up, producers are willing to produce and supply more goods. On the other hand, the law of demand also states that the higher the price of a good, the smaller is the quantity demanded. If the price goes up, consumers will less willing to buy the goods and also not able to afford it. So in the other way of saying this situation is demand will decrease as price rises whereas supply will increase as price rises.

            Why does a higher price increase the quantity supplied of a good? It is because the increases of marginal cost. If the quantity produced increases, the marginal cost of the good will also increases at the same time. Supplier or producer will never produce a good if the price of good cannot cover the marginal cost of the good, it must at least cover the marginal cost of producing it. On the other hand, why a higher price will reduce the quantity demanded? In this situation, income effect may become the reason. Government cut down the subsidy for sugar and make the price of sugar goes up. But, the income of consumers may not increase on the same time. So, face with a higher price and unchanged income, people cannot afford to buy anything that they want and normally, when the price of good increase, consumers will choose to give up buy it.  So, once sugar has increase the price, consumers may consider to less buying it. For an example, product A had increase the price from RM 2 to RM 5, then consumers had faced the problem of income unchanged and the price of good increase, so definitely consumers will choose to give up or less buy the product.

            Next, as we know that, subsidy can reduce the cost of production. Subsidy is a payment made by government to a producer. The main reason to give this subsidy is to decrease the cost in production and make the price of good become lower. A subsidy is just like a negative tax. A tax is equivalent to an increase in cost, so a subsidy is equivalent to a decrease in cost. Let give an example of the effects of a subsidy given by government.


            This graph shows that with no subsidy, supplier produce 40 million tons sugar a year at RM 40 a year. After that, government give a subsidy of RM 20 a ton shift the supply curve rightward to S-subsidy. The equilibrium quantity increases to 60 million tons a year, and the price of course falls to RM 30 a ton due to the subsidy given. So, if this show in the sugar production, a production subsidy effectively means a greater production, and as the cost of production is lower, it make chance for those marginal firms to survive in this market. Besides that, it can also create a more competitive market and give consumers have more choices in choosing the products.

            Hence, review back to the article, government has reduced the subsidy for sugar. So, it will change the supply and also the demand for sugar. Below is the new graph for sugar supply and demand after the changed in subsidy.




            As we can see in this graph, government has reduced the subsidy for sugar. It causes the price of sugar has increases from RM 30 a ton to RM 40 a ton. This make the supply curve shift leftward to s-less subsidy. Whereas the quantity demanded for sugar has decrease from 60 tons a year to 40 tons a year. So, with fewer subsidies, producer will not willing to produce more products, it is the way to prevent loss. The cost for producing sugar has rises, and producer has to bear the cost more without the help from government. Consumers also not willing to buy this thing again and they will choose to give up.

            On the other hand, with the increasing price of sugar, it will also affect the price of related goods. It definitely will affect the price of foods and drinks. As we know, foods and drinks are most related to sugar. Many foods and drinks need use sugar to produce it, such as roti planta, the tarik, milo and many more. As long as the price of sugar increase, I believe that the price of foods and drinks will rises soon. Although that government say they will monitor and prevent restaurants to increase the price of foods and drinks but I don’t think this is the long way. Those people will still increase the price on the future time even though it just an increasing price of 10 cent or 20 cent. Maybe now they still can cover the cost of production, but after a long time, they still will move all those cost to us, as a consumer to handle it. They can’t afford the cost rises in a long time, because they need to make profit too.

            Last but not least, I believe that this step make by government is to protect the health of people too. Overtaking sugar will causes diabetes and also obesity. The percentage of getting diabetes and obesity are getting higher nowadays in Malaysia. One way to prevent it is less taking sugar. Government also hope that all of the restaurant can reduce the use of sugar in their foods or drinks preparation to make sure consumers won’t excess the sugar intake. So, less taking sugar will not only benefits our health, but also can help us to build a healthy country in this world.

House price hike likely

House price hike likely

According to The Star, based on a business news it is about “House prise hike likely” that return by David Tan on August 17, 2012. (http://biz.thestar.com.my/news/story.asp?file=/2012/8/17/business/11870222&sec=business) It is about the recent increase in the prices of cement at around 6% by Lafarge Malayan Cement will soon cause an increment of 5%-10% of Penang selling property price as according to housing developers here in Penang. Previously the price for a 50kg bag of cement is priced at RM16.50, after the hike the price of a bag of cement is priced at RM17.50. Lim Kai Seng, the president of Building Materials Dealers Association & Penang Master Builders said that around 60%-80% comprised cement and cement-related materials are used for a building. This is one the reason why the property prices will face a significant impact when the price of the cement increases.

            Cost of production increase is one of the main reasons that could affect the price of house. If the cost of production increase but price of housing remaining the same, the profit that earned by the builder will become lesser or some might be transform from profit to loss. So the builder will have to decide on how to increase the profit.

            Due to the reason for cost of production it will increase the price of the house, by naturally the power of purchase for people will also decrease means that the quantity demanded will be decrease. Higher price reduce the quantity demanded is the income effect, for example in this case when the price of house rises, the price of house rises relative to income. Their situation is facing the market price for house from a price to a higher price and unchanged income. Reason of having a limitation of asset, the people who plan to purchase a new house will fail. The number of people who choose to rent houses will increase, and the number of houses to rent will decrease. When the product supplied is more than product demanded then the surplus will occur. Surplus is being more than or in excess of what is needed or required.

            Every entrepreneur will set their goal to earn the highest profit, no one willing to make a loss business. When the price of the product in the market is high, quantity supplied be also becoming higher so that they could maximize their profit of the product. While the price of the product in the market is low, the quantity supplied will become lesser. In this case, when the houses is selling at a high price, estate agent will try their best to sell it as much as possible so that they could maximize their profit, while the price of the houses is selling at a low price the houses, the unit of the houses that available to purchase will become lesser, they keep the remain unit of houses to sell it off later when the price of the market for houses increase, so they could sell off all of the houses and also get to maximize their profit.

Demand Curve

            Demand curve is the distinction between demand and quantity demanded. The term demand refers to the entire relationship between the price of good and the quantity demanded of the good. The term quantity demanded refers to a point on demand curve which the quantity demanded at a particular price. Refer to the graph above is shown about the price and the quantity demanded of houses. For example when the price for a unit of house is at 150,000, the quantity demanded is 2250 units. If the price for a unit of house is 300,000, the quantity demanded is 1500 units. While for the price of 450,000 per unit, 600,000 per unit and 750,000 per unit the respectively quantity demanded is 1000 units, 700 units, and also 500 units. Due to the reason of the unchanged salary but big changes in the price of houses, consumer could not afford to purchase. Reason of the price increase and the quantity demanded is drops, the demand curve will move upward along the curve.

Supply Curve

            Supply curve is about the critical distinction between supply and quantity supplied. The term of supply is between the price of the good and the quantity supplied of it. The term quantity supplied refers to a point on a supply curve that the quantity supplied at a particular price. Refer to the graph above is shown about the price and the quantity supplied of houses. For example when the price for a unit of house is at 300,000, the quantity supplied is 600 units. If the price for a unit of house is 450,000, the quantity supplied is 1000 units. While for the price of 600,000 per unit and 750,000 per unit the respectively quantity supplied is 1400 units and also 1500 units. Due to the reason of increasing in the price for cement and other material so the price of the houses will also naturally increase. The curve shifted leftward from S0 to S1. So the price of house will increase 150,000 per ever unit.

Market Equilibrium

            Market equilibrium is help to see how the price adjusts to coordinate buying plans and selling plans and achieve equilibrium in the market. As equilibrium is a situation in which opposing forces balance each other. The equilibrium point will occur when the quantity demanded equal to the quantity supplied or in another way means that the intersection point between the demand curve and supply curve. The price below the curve will be a shortage and the price above the curve will be a surplus. It helps to balance the market so that surplus and shortage will not occur. The market equilibrium is the intersection between S1 and D0.

Global food prices rise due to extreme weather

Global food prices rise due to extreme weather

According to BBC NEWS, Business, return on 9 August 2012 last updated at 11.50 GMT report about “Global food prices rise in July due to extreme weather”. (http://www.bbc.co.uk/news/business-19193390)

In July, the global food prices rise due to the wild swing in weather environments. In economics view, the quantity demanded for the good and service will naturally decrease. Between 2007 to 2008 there are a food crisis which hurt the world’s poorest, the rise has fanned fresh fears of a repeating of that.  Changing of the monthly price for a basket of food commodities, including oilseeds, cereals, sugar, meat and dairy, the food price index is measured by the FAO.

The extreme weather like droughts and floods are the primary factor that cause the food price to soar. The extreme weather may affect the quality of soil which was the main criteria to grow and harvest a good crop. Many crop have to take a longer period to mature while some of the crop were damaged. This had caused the farmer unable to harvest the crop on time and supply the original amount like before. Consequently, when the quantity supply for crop decrease and the market will face shortage problem. In order to move the quantity demanded curve back to equilibrium, the price of goods have to increase to a higher price.

Besides that, goods like rice and corn are highly demanded by the people as it is necessities. The government needs to import those goods like oilseeds, cereals, sugar, meat and dairy from other country in order to make sure that the quantity supply is enough for the people. As a result of the import good from other country, the price of goods will increased due to the extra import tax that need to pay by the supplier and the consumers.

More and foremost, in my opinion that the price of the item will increase is due to the expected future price, because the shortage of the good and the wild swings in weather environment. Hence, the shortage problem will turn more serious, which will cause the price of goods to rise as well.

Demand is human needs or wants, and willingness to pay for a specific goods in a certain price level. Human's demand can be goods or services that produced by the firms or household. For example, a person needs a car as transportation, by the time when the persons own a car, he will demand for a better condition car and this is no longer human needs but human desire or wants.

Reason that will affect the price to increase and decrease the quantity demanded is the income effect. Income effect is when a price of a good or service increase, but other things are still remaining the same, such as personal salary or income. For instance, when the price of goods increase but the salary or wages of the consumers remain the same, consumers could not afford to purchase the good or service as many as before, hence the consumer purchasing power contracts.

Firms supply goods and services to consumers or retailers in order to earn profit. Firms will usually use the lower cost and maximize the selling price in order to maximize their profit. For the supplier, they has the resources and the technology to produce goods and services, it helps to determine the possibility of the product to produce and also reflects of the decision about which of the technologically feasible items to produce. It is not necessary that the producer produce the same quantity as the quantity that had been sold. Sometimes, the quantity supplied is greater than quantity demanded, at the end there are much more product left than product sold.

What is the state of nature? State of nature is includes all of the nature power that could influence the production, for example the weather, land, and also natural disaster. Good weather can increase the supply of the product. On the other hand the bad weather will decrease the supply of the product. As what mentioned in the article, global food prices sharply rebounded in July due to wild swing in weather environments, it will decrease the supply of the product. Since this unexpected natural phenomena happened, the supplier have to deal with the limitation of the resources in order to make they have enough product to supply to the market. In business talk, there are no company is willing to invest on a business which will generates zero-profit. Supplier have to fix and sell the product in a higher price to make sure that it could cover the cost of production and maximize their profit, and identify that it is a profitable company. Although if the company set in a high price, people will also purchase from it as it is a necessities for everyone.

            According to the graph, the vertical axis represents the price, and the horizontal axis represents the quantity. There is a shortage between the supply and demand. The red point that shown in the graph is the equilibrium, which is opposing forces balance each other. It gets the equilibrium point from the supply decrease and demand increase on the demand curve and supply curve. As for the equilibrium price is the price at which the quantity demanded equals the quantity supplied, while for the equilibrium quantity is the quantity purchase or sold at the equilibrium price. 

Price elasticity of demand of cigarettes in Singapore

             Based on an internet news “tough laws do not stop rise in Singapore smokers” written by ‘Straits Times Indonesia’ at http://www.thejakartaglobe.com/health/tough-laws-dont-stop-rise-in-singapore-smokers/424096 on 22 February 2011, Singapore is a developed country and its citizen’s general level of health is the best in Asia. Of cause Singapore has its own strategies to control its citizen’s lifestyle, however, not long ago there is an internet news which heading with “Tough laws don’t stop rise in Singapore smokers” this eight words. This means despite steep cigarettes price and restrictive laws were set up, but more and more people are lighting up in Singapore. A figure shows that year 2010 14.3 per cent of adults smoker there were smoking daily up from 12.6 per cent which is in year 2004, and the number that increase of daily smokers among young adults who aged 18 to 29 is even more worse, it rise up to 16.3 per cent in 2010 from 12.3 per cent in 2004 (data comes from the National Health Survey). The taxes of cigarettes raised to S$ 352 from S$ 293 in 2005 for every 1,000 of cigarettes imported, the raised of cigarettes price caused a pack of smokes to the current average of S$ 12, this made Singapore become one of the world’s most expensive places to light up  cigarettes.

               Even thought the percentage change in quantity demanded and the percentage change in price have not given in this internet news, but readers still can get the correct answer of price elasticity of demand of cigarettes in Singapore. Very obvious, the price elasticity of demand is inelastic, because even government of Singapore set the hard rules and higher tax on cigarettes, the quantity demand for cigarettes remain the same and even more and more. Why government action can’t decrease the consumption of cigarettes, elasticity can explain it. Elasticity this word in economics’ view is responsiveness, price elasticity of demand can be seen as a responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. To calculate the price elasticity of demand need to use a particular formula and the formula is % change in quantity demanded divide by % change in price. To calculate the figure of % change in quantity demanded is the quantity change divide by average quantity demanded; to calculate the figure of % change in price is the price change divide by average price. Call the percentage change in the quantity demand %ΔQ and percentage change in the price %ΔP, then the formula will look like:  %ΔQ= ΔQ/Qave × 100,   %ΔP= ΔP/Pave ×100. By the way of using percentage of average price and average quantity, can get value for the elasticity regardless of the price falls or rises. Inelastic and elastic demands divide into five, which are perfectly inelastic demand, inelastic demand, unit elastic demand, perfectly elastic demand and elastic demand.

Perfectly inelastic demand

                The characteristic of perfectly inelastic demand of a good is the quantity demanded remains the same when the price change, the price elasticity of demand is zero. The characteristic of in elastic demand of a good is the percentage change in the quantity demanded is less than the percentage change in the price, the price elasticity of demand is between zero to one. The characteristic of unit elastic demand of a good is the percentage change in quantity demanded equals to the percentage change in the price, the price elasticity is one. The characteristic of perfectly elastic demand of a good is the quantity demanded changes by infinitely large percentage in response to the price change, the price elasticity of demand is infinity. The characteristic of elastic demand of a good is the percentage change in quantity demanded exceeds the percentage change in price, the price elasticity of demand is greater than one. Sum up, if the demand curve is vertical, the graph is a perfectly inelastic demand; if the demand curve is horizontal, the graph is a perfectly inelastic demand. If the price elasticity of demand of a good is zero, the good is perfectly inelastic demand. If the price elasticity of demand of good is between zero and one, the good is inelastic demand. If the price elasticity of demand of a good is one, then the good is a unit elastic demand. If the price elasticity of demand of a good is greater than one, then the good is elastic demand.

                 After knowing the price elasticity of demand, producers can easily know about the change in total revenue is increase or decrease if cut down the price of the good and it is depends to the elasticity of demand. If demand is elastic, a figure of price cut would increase the quantity sold by more than the price cut, so total revenue is increase. If demand is inelastic, a figure of price cut would increase the quantity sold by less than the price cut, therefore total revenue decrease. When the demand is unit elastic, a figure of price cut is equal to the increase of quantity sold, then the total revenue does not change. The following graph is the evidence of a cut in the price does not always means the total revenue is decrease.                            

                 When the price elasticity of demand of a good is between zero and one, the demand of the good is inelastic demand. A price cut to an inelastic demand would not increase the total revenue; on contrast a rise to the price would increase the total revenue. Demand of cigarettes is inelastic, as a result, responsiveness to the change in price is not obvious, so the government set a high tax to cigarettes is very difficult to decrease the quantity demanded of cigarettes. All in all, I don’t agree with the action of government, because government should not only increase the tax of cigarettes in order to stop their citizen to smoke, government should also do other things such as stop giving medical subsidy to smokers, and used the money that save from smokers to held some healthy campaign to avoid citizen get addicted to cigarettes. 

Written by: Hoo Kien Meng

Demand of haddock and cod ‘exceed the supply of United Kingdom’s seas’

        Based on an internet news “Fish demand ‘exceeds UK sea supply’” published by press association at http://www.guardian.co.uk/environment/2012/aug/21/fish-demand-uk-sea-supply on 21 August 2012, United Kingdom is a Kingdom which combined by England, Scotland, Wales, Northern Ireland and many subsidiary islands. Most of the land of United Kingdom surrounded by ocean and seas which are Atlantic Ocean, Celtic Sea, North Sea, English Channel and Irish Sea. Fisheries of United Kingdom is very developed because surrounded by seas and ocean, as a result most of the British mainly eat fish. Developed of fisheries supply British with a lot of marine products, so the price of fish is cheap and this causes British willing to eat fish. Slowly, British adapt to eat fish and fish had become their important food, even became their traditional food (fish steak). In the opinion of British, haddock and cod are the most suitable ingredients to make fish steak. Therefore demand of haddock and cod had increased for several years, in order to satisfy demand of British, fisherman of United Kingdom captured a large figure of haddock and cod every day, finally this caused overfishing of haddock and cod. The resources of haddock and cod in United Kingdom’s seas has obvious decreased, however so far the resources of haddock and cod still can cope the demand of British. The decreased of cod and haddock had caused the attention of United Kingdom’s government. In order to let the next generation to have enough haddock and cod to enjoy, rules for the management of the UK’s fisheries quotas has been made and issued by the fisheries administrations in United Kingdom which is authorize by government of United Kingdom. The rule for fisheries quotas allowed the fish stocks to recover from overfishing; on contrast, it caused a shortage for haddock and cod. An internet new reported that the United Kingdom fish consumption in 2012 has already matched what their seas can supply the fish for them in this year on 20^th of August. Which means, if United Kingdom only depend their own fisheries for the year without imported would cause them out of stock (haddock and cod) today (report from the New Economic Foundation (NEF) which calculated it), because the Annual fish supplies from United Kingdom’s seas can only satisfy the demand of British for 233 days. Therefore the heading of the internet new is fish demand ‘exceeds UK seas supply’.

             Even though United Kingdom is a big fishing country, but the supply of fish still cannot satisfy the demand of British, the supply of fish can only satisfy 2/3 of the internal demands. Therefore, the price of fish (haddock and cod) is getting higher and higher, it is because according to the price adjustments of market equilibrium and the phenomenon of price of fish getting higher and higher can be illustrated through the (graph 1). Assume that graph 1 is Equilibrium of haddocks.

                  Graph 1 lists the quantity demanded and quantity supplied as well as the shortage and surplus at certain price. If the price of haddock is two pounds per piece, 40 thousands of haddocks per day are demanded and 30 thousands of haddocks are supplied. There is a shortage of 10 thousands haddocks per day and the price rises. If the price is three pounds per piece, 28 thousands of haddocks per days are demanded and 42 thousands of haddocks are supplied. There is a surplus of 14 thousands of haddocks per day and the price falls. If the price is 2.4 pounds per piece, 33 thousands of haddocks per day are demanded and 33 thousand s of haddocks are supplied. There is neither shortage nor surplus and the price doesn't change. Equilibrium price is quantity demanded equal to quantity supplied, 33 thousands of haddocks per day is the equilibrium quantity.

                    Market equilibrium is the price balance the buying and selling plans, equilibrium price is the price that the quantity demanded equal to quantity supplied, equilibrium quantity is the quantity demanded and quantity supplied at the equilibrium price. Market would move toward to its equilibrium because price adjusts the buying and selling plans. When the price is below equilibrium, there is a shortage and if the price is above equilibrium, there is a surplus. When shortage happen, market pressure would make producers either raise the price or increase the output. When producers raise the price up, the price would raise to its equilibrium. The rising price can reduce the shortage because it decrease the quantity demanded and increase the quantity supplied, the price would raise until its equilibrium (no shortage and no surplus); on the other, when surplus happen, market pressure would make producers either lower the price or decrease the output. When producers lower the price, the price would fall to its equilibrium. The lowering of price can reduce the surplus because it increase the quantity demanded and decrease the quantity supplied, the price would fall until its equilibrium (no shortage and no surplus). The price adjustment is according to the law of demand and law of supply. Law of demand is the higher the price of a good, the smaller is the quantity demanded; the lower the price of a good, the greater is the quantity demanded. Law of supply is the higher the price of a good, the greater is the quantity supplied; the lower the price of a good, the smaller is the quantity supplied.

                   In order to satisfy the other 1/3 of demand, fishmonger of United Kingdom forced to import fish from outside the EU, this result some demanded of haddock and cod in United Kingdom reliant on foreign countries such as China and India, therefore one third of fish that British eat is from other countries. NEF leaders stated that UK imported 101,000 tons of cod and 60,000 tons of haddock, which worth 372 million pounds and 156 million pounds in 2010. After the fish imported to United Kingdom, the original graph (graph 2) will look like (graph 3).

The supply curve would shift rightward (from S to S1). If the supply decreased and the price remain the same, the supply curve will shift leftward.

                   I agree the United Kingdom’s government set up a rule to limit the quota of fish caught, because human can’t only eat all the specific fish that only they like, if human only eat whatever fish they like, gradually the specific fish would become fewer and fewer and in the end it would become extinct. This sense is same as people can’t kill a goose that lays golden eggs, because once the goose got killed, people would not get golden eggs anymore. As the same, if human only eat cods and haddocks, cod and haddock would become extinct, the younger generation would not have the change to try the taste of cod and haddock, and this unfair to them, so I totally agree the action of United Kingdom government. 

Written by Hoo Kien Meng