An economic view: Ever wondered?

MOSCOW- Russian's government takes control over the internet and non-profit organizations thus allows them to block websites that exposed dangerous to children and adjures nonprofits organizations to identify themselves as "foreign agents" if they receive financial from outside of Russia. It is considered by the government to be engaged with its political activities. Also, Russian's government imposes fines for people who participate in protests, and legislators voted criminal charges for slander prompting a warning to the United Nations human rights chief that Russia is sliding back into Soviet ways.

Have you ever stopped for a while in the world full of mystery and wonder how exactly do large and complex societies in Russia answer the basic questions of economic inputs and outputs? 

• Who links the agencies and institutions to one another?
• What gets produced?
• When information flows between them?
• How is the outputs produced?
• For whom it is produced?

In this post we shall explore how the economic systems work. There are three main economic system, command economy, free market economy and mixed economy but today I'm going to talk about command system. 

Command system is known as the centrally-planned economy. Initially, Russia adopts an oriented command country management but with the recent news (first paragraph) they are acting more as a perfect command economy system. In a perfect command system, the basic questions are all answered by the government, the central authority usually combine a group of top government officials that assume the natural, capital and labor resources are owned by them. The Russian government decides from top to bottom on the decisions making of the country without considering the market forces or its citizens opinions.In an oriented command economy, government at least allow market economies to function in different degrees and capitalists to own and expand their businesses to a large extent than before. 

Other countries that adapt the command economic system includes

Cuba

North Korea

The former Soviet Union

 In my opinion there are pros and cons of adapting this system in a country. Example, in North Korea there are more public goods provided. Besides that, the countries that comply this system have full employment and low inflation and have high level of savings and capital accumulation. Most importantly the distribution of wealth is equal, therefore there will no separation of wealthy and poor people. The cons of accustom this though are an occurrence of immense to plan when the company becomes more advance and complex, has no incentive to innovate thus produce little innovations. 

Written by:

Ameera Dyanah bt Mohd Kaisan

MALAYSIAN & FREE THINGS

Malaysian people sure love free things. FREE education, FREE healthcare, petrol subsidy and especially FREE FOOD.

Note: " We don't mind waiting for few hours just to get ONE free burger"

Meanwhile in USA:

"IT'S ALL ABOUT FISCAL CLIFF: INCREASE TAX, REDUCE SPENDING"

Based on news article by BBC, Obama demands more tax to be paid by the rich in order to avert a looming budget crisis. Republican House Speaker John Boehner object to this proposal as there are many other factors need to be taken into consideration. Full article here.

One does not simply:

The above article is about FISCAL POLICY. What is a fiscal policy all about??

Fiscal Policy= Government's Spending and Taxation

In the article, Obama is going for Contractionary Fiscal Policy which is to reduce spending and increase taxes during boom times.

Sounds good theoretically right?? Then, why did John Boehner object to this idea?? Everything has its own pros and cons. The same thing goes when you apply a policy. If you tax more the rich, their disposable income decreases, thus they will reduce their investment. When the investments are reduced, the employment and income rate will go down and this can lead to recession.

Taxes=Increases, Disposable Income (Y_d) =Decreases, Investment=Decreases, Employment Rate= Decreases can lead to a possibility of recession.

Of course Obama is fully aware of the risk. He also has his own sets of economists to analyse the situation. Then, why he's still going for it. If you think in this perspective, even if you tax the rich, it does not affect them as much. It's like removing icing on top of the cake and Obama believes the strengths of American Economy lies on building the economy of the middle class and small enterprises as they are the majority population. Quoted by Obama, "The best of America is yet to come".

Whereas In Malaysia:

"The Unwritten Rule: NEVER QUESTION FREE THINGS!!"

Most Malaysian in general never think where they get all the free stuffs such as subsidy, cheap bills from government hospital etc. As we all know "Money does not fall from sky". Nothing comes free in life but then how did we get to enjoy all the benefits given by the government. It's simple, TAXPAYER'S MONEY. The people did not realize the fact that government tax us then uses the money a.k.a the collected tax to pay for the free things that we enjoy. It's like taking money from our right pocket and putting back a chocolate into our left pocket.

My point is, Malaysian should be more concern about the state of their country's economy instead of just demanding free things without knowing the positive and negative implications to them and the future generations. In advanced country such as Switzerland, the people knows about their economy and that is why they don't like free things because they realize that if it's free, it must have come from somewhere, which is the Taxpayer's money. Also, when things are free, people appreciate less and waste a lot. In economy, every step taken there's a pros and cons because everything is related to one another. Therefore, MALAYSIANS, THINK WISELY!!

Short comics about the differences in economic state in few countries:

-Nur-Izzati Zahirah Binti Che Ibrahim

What is your contribution to Malaysia?

From my own personal experience and perspective, I saw a lot of Malaysians gushing about how proud and admire they are of the topnotch international entrepreneurs. To be specific like Bill Gates, the late Steve Jobs and Warren Buffett but what about our local and well-established entrepreneurs? Should we just shut them down completely?

We as a Malaysian should not forget that our country too has inspiring entrepreneurs. In this post, I would like to share to you about a young Malaysian entrepreneur who has been an idol of mine since last year.The name of this amazing lady is Amanda Nasim. She is 20 years old and in her final year of economic and finance student in York University, United Kingdom (UK). Wonder why I admire her so much?

Amanda Nasim

It's because she is the co-founder of the Tutti Frutti UK. 

Yes, believe it. More of an amazement, she was only 19 years old when she stood before 80 bidders at an international conference in Los Angeles to pitch her proposal to the big boss Jay Kim, founder of Tutti Frutti. Not only that she is the co-founder of Tutti Frutti UK she also owns the biggest Tutti Frutti outlet yet in the world with a two storey building. The outlet is located in Convent Garden in central London making it the first in Europe.

Tutti Frutti Convent Garden

With this business that Amanda Nasim is handling in UK, she is directly contributing to the Gross National Product (GNP) of Malaysia. GNP measures the market value of all final goods and services produced by nationals whether they are located in the country or abroad. Whether one is based in Japan or USA as long as he or she is a Malaysian and earn incomes they are contributing to Malaysia's GNP. Amanda is expecting to open at least 20 outlets in England, Scotland and Ireland by 2013 thus contributing more to GNP as the currency of UK is around 4.5 more than Malaysia. 

The lesson i learnt from this is we should thrive more in order to be successful in our life while still being a contributor to our beloved country. Be different, be unique, be bold. Don't be afraid to be adventurous by taking risks and as we are all informed, most Malaysians are afraid in spreading out of their comfort zone. 

Just look at Amanda, she is still studying while juggling with her business too. Amanda hasn't only been contributing in our country's GNP but indirectly she is also increasing the good names and reputation of Malaysia. Just imagine what Mr Jay Kim would think of her. Not just a determine young girl but a determined young Malaysian girl. The advantage of this GNP, shows how much Malaysia has grown compared to our neighboring nations. 

So, what have you done or going to do in order to increase Malaysia's GNP?

Written by:

Ameera Dyanah bt Mohd Kaisan

Wants vs needs?

One of the most basic concepts of economics is want vs. need.

What are they exactly?

 

A need is something you have to have, something you can't do without. A good example is food. If you don't eat, you won't survive for long. Many people have gone days without eating, but they eventually ate a lot of food.

You might not need a whole lot of food, but you do need to eat.

A want is something you would like to have. It is not absolutely necessary, but it would be a good thing to have. A good example is music. Now, some people might argue that music is a need because they think they can't do without it. But you don't need music to survive. You do need to eat.

These are general categories, of course. Some categories have both needs and wants. For instance, food could be a need or a want, depending on the type of food.

You need to eat protein, vitamins, and minerals. How you get them is up to you (and your family). You can eat meat, nuts, or soy products to get protein. You can get fruits and vegetables to get vitamins and minerals. You can eat yogurt or cheese to get other vitamins and minerals. You can eat bread to get still more vitamins and minerals. These basic kinds of foods are needs.

Ice cream is a want. You don't really need to eat ice cream to survive. You can eat it to get some vitamins and minerals, but other foods like cheese and yogurt give you more of those same vitamins and minerals without giving you the fat that ice cream does. Still, ice cream tastes good to many people. They like to eat it. They want it, but they don't need it. They like it, but they don't have to have it to survive.

OK, we've covered food. What other kinds of things does your body need to survive?

Another example is liquid. Your body has to have liquid to survive. Water is a good liquid to drink because it keeps you healthy. Milk and fruit juice are also good because they give you vitamins and minerals your body needs without giving you the fat and excess sugar found in cola. Still, cola tastes good. Drink a Pepsi or Coke or Mountain Dew or Sprite and you feel good because it tastes good. But you don't need that cola to survive.

Now, see the difference between need and want?

-Ivan Kon

OLIGOPOLY!

OLIGOPOLY! =D

Oligopoly is a state of limited competition, in which a market is shared by a small number of producer or sellers. Basically oligopoly would only exist when there are only little firms in an industry that they must consider the reactions of the rivals in formulating its price policy. Therefore, they are 6 essentials characteristic features of oligopolistic market.

Oligopoly characteristics are:

• Firstly, a few large producers where they have a wide range of sellers competing with each other for growing their supplies goods or commodities for sale.

• Secondly, homogeneous products can be like rubber, tin, oil, steel and zinc or differentiated products (an imperfect oligopoly) are automobiles, tires, detergent, cigarettes and breakfast cereals.

• Thirdly, is the control over price where as they must have a mutual interdependence as in respect between two or more parties for their pricing policy and their strategic behavior.

• Fourthly, high entry barriers are when the difficulty needs to enter the industry. Such as, likely the entry exist more of a copyrights, patents, advertisements and also economies of scale (EOS).

• Fifth, are mergers where as a combination of two companies.

• Sixth, Non-price competition like brand loyalty, advertisement, marketing special offer, packaging, after sales service.

PARTNERS OR RIVALS?????

In oligopoly there is a big dilemma where an oligopoly need to choose either to cooperate with one another to create on large monopoly or to not cooperate with rival firms. If they join with one another they can jointly restrict output and enjoy the monopoly benefits in the long-run.

Collusion in oligopoly to enhances profit. Other collusion are covert collusion in a tacit understandings and obstacle to collusion where they are demand and cost differences, number of firms, cheating, recession, potential entry and legal obstacles: antitrust law.

Therefore, advertising is a prevalent in monopolistic competition and oligopoly. Other than that, to capture market share and manipulation.

Hey, anyway here's an extra information to brighten up the topic i write about.

Check it out this company because they are using oligopoly system.

• http://zanesafrit.typepad.com/zane_safrit/2009/05/the-oligopoly-of-our-healthcare-system.html

- Farah Anisah Binti Abdul Wahab -

Opportunity Costs in Everyday Life??

In life you cannot avoid making decisions, maybe a simple or one that could change your life. I myself experienced this situation before and I know that won't be the last one. Now, you're thinking is this somewhat related to economy?? I SAY YES. In everyday life, without realizing we're applying some of the economic concepts.

A good example of economic concepts we often use:

As we all know human wants are unlimited but the resources are limited. You might say , '' I'm contented with what I have.'' There's more than that to it. Wants are not limited to material things. It could be other things such as time. You often hear people say '' I don't have much time''. You desire for more time, but you don't have enough. In this context, time is the resource. You're facing scarcity. Scarcity arises when people desire more things than available resources can provide.

Then you have to make a choice. As a rational human being of course you would want to make the best choice. If you are an individual you'll make your choice based on ones that will maximise your satisfaction or if you are a firm of course your choice will be based on which one will maximise your profits.

Let say your choice is between A and B, and then you decided to choose A. B will be your opportunity cost. An Opportunity cost is the value that you have to forgo in order to make one particular choice instead of another.

The explanations above are all based on theories. How is it related to you in real life?? Let me give a simple real life example:

You don't have enough TIME to study for your exam. The only time you have is during the night, but you also want to sleep (Scarcity). You have to make a CHOICE, whether to STUDY or to SLEEP. If you choose to STUDY, your opportunity cost is your SLEEP and if you choose to SLEEP, your opportunity cost is your STUDY.


A simple concepts, yet applicable to our daily lives. You can watch the video if you want to know more about the theory part in details:

-Nur-Izzati Zahirah Binti Che Ibrahim