REPORT MICROECONOMIC (ECO162) UITM PDF

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FACULTY BUSINESS AND MANAGEMENT UNIVERSITI TEKNOLOGI MARA (UITM) KAMPUS KOTA KINABALU, SABAH DIPLOMA IN BANKING MICROECONOMICS REPORT LECTURER: SIR JAIN YASSINPREPARED BY:NAMA NO. PELAJARVERONICA STEPHEN 2020888046ELIYA ATHIRA BINTI IBRAHIM 2020494722MUHAMMAD IQBAL BIN SEKAK 2020626934MUHAMMAD ZULHA...

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FACULTY BUSINESS AND MANAGEMENT UNIVERSITI TEKNOLOGI MARA (UITM) KAMPUS KOTA KINABALU, SABAH DIPLOMA IN BANKING MICROECONOMICS REPORT LECTURER: SIR JAIN YASSIN

PREPARED BY: NAMA VERONICA STEPHEN ELIYA ATHIRA BINTI IBRAHIM MUHAMMAD IQBAL BIN SEKAK MUHAMMAD ZULHADI BIN MAIRAN AB FARAHANIE BINTI ANDI MOHAMAD GHAZALI

SEMESTER 2 SESI 2020/2021

NO. PELAJAR 2020888046 2020494722 2020626934 2020670274 2020694402

Table of Contents INTRODUCTION ..................................................................................................................... 1 MICROECONOMICS PROBLEMS RELATED TO COVID - 2019 ...................................... 2 INCREASE IN COST OF LIVING ....................................................................................... 2 DEMAND AND SUPPLY .................................................................................................... 8 MONOPOLY ....................................................................................................................... 10 CONCLUSION ........................................................................................................................ 14 REFERENCES ........................................................................................................................ 15

INTRODUCTION The impact on the economy has begun to be felt around the world, including in Malaysia, even before the WHO declared COVID-19 as a pandemic. More significant impact on the national economy occurred when the Movement Control Order was first introduced and was considered a more serious second round effect on the economy as not only production activities were disrupted but more serious disruptions were due to closure or reduction of operations due to MCO. On this pandemic also causes some workers to lose income. Among others, smallscale trade activities stagnated, contract workers lost income and various other constraints on economic activities that affected individual income. Malaysia's unemployment rate was reported to have risen drastically last year after Covid-19 rocked the world starting February 2020. The number of unemployed, which was previously below 4 percent, suddenly jumped to 5 percent after many lost their jobs due to the impact of the Covid-19 infection. Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. One of the purposes of microeconomics is to analyse market mechanisms that set relative prices between goods and services and allocate limited resources between alternative uses. The microeconomy indicates a situation where the free market leads to the desired allocation. It also analyses market failures, where the market fails to produce efficient results.

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MICROECONOMICS PROBLEMS RELATED TO COVID 2019 INCREASE IN COST OF LIVING The cost of living is usually the focus of discussions about rising prices, but for many Malaysians, the main issue is not so much inflation as it is the slow pace of income growth. Although household income may have grown at a rate that matches expectations, it may not have matched the aspirations of Malaysians for improving the standard of life. Some households may be forced to work longer hours or take on additional jobs to make ends meet. This could strain their personal well-being. This shows how much the low-incomer are struggling but things got worse with the current phenomenon, Covid-19. The existing of Covid-19 pandemic especially has not made it easy for everyone. It has caused significant morbidity and mortality, and it has had far-reaching effects on the lives of the poor and vulnerable such as those with little or no savings to fall back on. These include those who have lost their jobs, are not covered by social safety nets, or have experienced pay cuts due to movement control orders (MCO). Through the movement control orders, only businesses or services deemed important are allowed to remain open, such as banks, selected restaurants, pharmacies, and supermarkets. Some industries and factories also had to close at least part of the MCO period, if not throughout that time. Several companies have since closed completely, leaving many daily wage and part-time workers suddenly unemployed. There is little way to get a way out when they are terminated due to MCO restrictions. Malaysians are categorized into three different income groups which is Top 40% (T20), Middle 40% (M40) and Bottom 40% (B40). (Based on Department of statistics DOSM). The pandemic impacts are more visible to the Bottom 40% or the B40 group. The pandemic had already affected the M40 group, which is already transitioning to the B40 group. It caused economic instability and raised concerns about the existence of the new poor as said by University Utara Malaysia Economics Lecturer, Prof Madya Dr Irwan Shah Zainal Abidin “This is certain. When politics are not stable, with the Covid-19 situation and the economic growth situation, new poverty will occur,” Umno’s Rompin MP Datuk Seri Hasan Arifin said in the Dewan Rakyat when debating Budget 2021, referring to the triple challenges

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that the country was facing as being an environment where people would find themselves as having newly fallen into poverty. Due to the impact of Covid-19, the income group classification may need to be revised said Umno’s Kimanis MP Datuk Mohamad Alamin similarly. “The B40, M40 and T20 projections I believe were done before Covid-19, but when there is Covid-19, the B40 and M40 projections are already different. Possibly it could be B40 is already B60, M40 has already become M20 and so on. I ask the government to revise this projection,” he said.

Based on the family financial gain & Basic Amenities Survey Report 2019 that was discharged in Gregorian calendar month by the Department of Statistics Malaya, the financial gain threshold for Malaysia’s B40 cluster (2.91 million households) was RM4,849. In alternative words, households earning below RM4,850 per month in 2019 were thought-about B40. The 2019 financial gain threshold for the M40 cluster (2.91 million households) was between RM4,850 to RM10,959 per month, whereas the 1.46 million households in 2019 earned quite RM10,960 per month the T20 or high 20% cluster. Aside from pre-existing conditions, the elderly also comprise a high-risk group. Unsurprisingly, NCDs account for most of the disease burden in older people. Moreover, 23.0% of heads of B40 households were aged 60 and above compared to only 8.7% of T20 households. Hence, low-income earners are more likely to be sick and old, both groups at higher risk of getting severe Covid-19 and of succumbing to it. While the urban poor are nearer to banking facilities and convenience stores, they too suffer. Most are daily-paid staff in blue-collar jobs or menial labour; several have since lost jobs. Those still used however captivated with public transportation suffer from restrictions obligatory on buses and trains. Those while not their own vehicles are stranded as taxis are on the far side their restricted budget. The urban poor don't have wild sources of food or house for home gardens. they're entirely captivated with store-bought sources and haven't any various after they run out of money. whereas myriad permutations of presidency aid got out before and through the pandemic, amounts and disbursements vary. A 2018 study by the Khazanah analysis Institute reportable that on the average, B40 households solely had RM76 (USD17) in post-expenses income monthly.

Many sleeps in physically compact communities and for the urban poor, in little flats. it should not be tolerable for them to remain inside once their square measure usually several 3

generations inhabiting a little confined house. an absence of refrigeration in several homes suggests that they're unable to get a week’s offer of food, notwithstanding they were ready to afford to try to therefore. Food delivery services square measure unlikely to be accessible or reasonable. NGOs and social staff scrambling to induce food and provides to the poor, elderly, disabled and shelters, were at the start suggested to depart the supply of help to official government agencies. There was no clarity on wherever given product or aid would go, nor whether or not the established networks of the poverty-stricken would get the provides that they urgently would like. Since then, the govt. has allowed NGOs to distribute food and provisions, however their square measure multitudinous government officials and impractical obstacles to beat. On several occasions, government agencies have asked NGOs for aid and men.

Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed same supported the unit financial gain, Expenditure and Basic Amenities Survey 2019, the economic condition rate for the year was five.6%, and it might currently increase by nearly 3 per cent specifically eight.4%. Mustapa same the difficulty of national economic condition was additionally placed as a priority below the twelfth Malaysia arrange (12MP), that among others, centred specifically on eliminating hardcore economic condition yet as reducing socioeconomic difference by implementing comprehensive and targeted programmes. He said the 12MP additionally emphasized the Bumiputera management agenda to scale back the gap between the Bumiputera’s and different races, excluding fast development in territorial dominion and district and different less developed states. Mustapa same he was scheduled to go to many locations in territorial dominion with the regime (officials) starting next week to urge actuality image of poorness there.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz stated that the government’s measures to reduce the financial burden of the B40 Group stated that 6.5 billion ringgits of monetary assistance will be allocated to benefit approximately 8.1 million Malaysians. The government will provide community centre, which can also provide afterschool care for children. He said: "These community centre will work with non-governmental organizations (NGOs) to allocate 20 million rupees. They will also be equipped with nursing facilities, cram schools, small libraries and an induction training program for tutors," he said. Regarding the previous suspension of loan repayments for specific groups, people in the B40 category who are assisted with micro-entrepreneurs can choose to defer repayment for up to 4

three months or reduce the monthly repayment by 50% for up to six months. The finance minister shared that those earning between 50,000 and 70,000 ringgits will pay a lower income tax of one percentage point. He also announced the Bantuan Prihatin Rakyat (BPR) plan, which will increase assistance to groups B40 and M40, and its distribution will be less than family income and the number of children per family. Families with a monthly income of less than RM2500 and one child will receive RM1200; families with a monthly income of less than RM2500 and two or more children will receive RM1800. However, single adults with a monthly salary of less than RM2,500 will receive RM350.

The government also announced the provision of a telecommunications credit of RM180 to the B40 Group, which is the desire of most people who yearn for better Internet access. Up to 8 million B40 group recipients will each receive RM180 with telecommunications credits. This help can also be used for Internet subscription plans and even subsidies for the purchase of new smartphones. The telecommunications company will also provide RM1.5 billion worth of revenue, including free mobile data. In addition to health coverage and protection, the government also plans to extend the stamp duty exemption period for all Tenang Protection products that do not exceed RM100 per year for another five years until 2025.

BASED ON THEORY MICROECONOMICS

The demand for ordinary products rises as people's earnings and purchasing power rise. A normal good is characterized as having a positive but less than one income elasticity of demand coefficient. In the case of ordinary goods, the income effect and substitution effect work in the same direction; the decline in the relative price of goodwill increases the demand because the goods are now cheaper than substitutes, and because lower prices mean that consumers have more the total purchasing power can increase their total consumption. Inferior products refer to products that decrease in demand as consumers' real income increases or increase as their income decreases. This happens when goods have more expensive alternatives and demand increases as the social economy improves. For low-quality goods, the income elasticity of demand is negative and the income and substitution effects work in opposite directions.

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Increasing the price of inferior goods means that consumers will want to buy other substitutes, but because their real income is lower, they will also want to reduce their consumption of other substitutes. Substandard products are often considered low-quality products, but they can get the job done for products on a budget, like regular bologna or rough, itchy toilet paper. Consumers prefer higher quality products, but need more income to pay high prices.

LAW OF DEMAND

As we all know, Covid-19 are threatening to the income levels. When income decreased consumers won’t be able to demand for more goods and services. They only able to afford thing that is in their limit of income. The economy is slowing down and many people are losing their jobs or working fewer hours, reducing their income. In this case, the decrease in income will result in a decrease in the quantity demanded at each given price and, as shown in the figure above, the original demand curve D0 will shift to the left at D1. The change from D0 to D1 represents a decrease in demand: at any given price level, the quantity demanded is now less. For example, if the original price of RM20,000 means that 18 million cars have been sold along the original demand curve, but now only 14.4 million cars have been sold after demand has fallen.

When the demand curve changes, this does not mean that the demand of all buyers will change by the same amount. In this example, not everyone has a higher or lower income, and not everyone will buy or not buy additional cars. On the contrary, changes in the demand curve reflect the pattern of the entire market. Higher income will lead to higher demand at any price. This is true for most goods and services. Especially for luxury goods, the impact of increased 6

income is particularly obvious. A product whose demand increases when income increases, and vice versa, is called a general commodity. There are some exceptions to this model. As income increases, many people will reduce their purchases of generic branded foods and buy more branded foods. They are less likely to buy a used car, but more likely to buy a new car. They will be less likely to rent an apartment, and more likely to own a house, etc. Products whose demand decreases when income increases, and vice versa, are called inferior products. In other words, when income increases, the demand curve shifts to the left. LAW OF SUPPLY

Goods and services are produced by a combination of labour, materials and machinery, or what we call inputs or factors of production. If the cost of the factors of production increases, so does the cost of production, thus reducing the supply of goods. If a company faces higher production costs, it will make lower profits at any given product sales price. As a result, higher production costs generally result in companies offering smaller quantities at any given price. In this case, the supply curve shifts to the left. For example, if the supply of cars shown by curve S0 indicates that if the price is RM20,000, the supply will be 18 million cars. If the price rises to 22,000 ringgits per vehicle (ceteris paribus), the number of vehicles supplied will increase to 20 million.

Now imagine that the price of steel, which is an important ingredient in automobile manufacturing, has risen and therefore automobile production has become more expensive. At any car sales price, automakers will respond by offering smaller quantities. This can be graphed as a left shift from S0 to S1, indicating that at any given price, the quantity supplied will

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decrease. In this example, the supply is RM20,000, which is reduced from RM18 million in the original supply curve S0 to RM16.5 million in the S1 supply curve.

DEMAND AND SUPPLY The Covid-19 pandemic was announced on 18 March 2020, causing Malaysia's economic cycle to change and start to suffer from the fall and loss. This can be seen when the government of Malaysia enforces movement control order (MCO) as a quick action when the whole country implements Global Lockdown to stop the spread of the new viral virus corona that causes death when in contact. As a result of movement control orders, there was a decrease in demand for the business market e.g., retail business, supermarket and many other forms of business. This is because the movement restriction measures do not allow at all a person to perform social activities, assemble in public places, restrictions on national borders, as well as the closure of all royal and private premises except those involved with the country's essential services. This results in consumers being unable to do shopping outside to avoid any interaction.

Traders who set up businesses to generate income suffered high losses when stock dumping and lack of purchase rates by consumers caused them to lose their source of income and some traders had to close their businesses or remove employees to cover the cost of losses suffered and also unable to pay their employees' salaries. Not only that, the governmentenforced sanctions measures showed the closure of support sectors such as retailing and transportation which resulted in most small traders being unable to operate and thus causing them to lose their source of income. In addition, during this pandemic season, consumers are more focused on spending on essentials such as daily food and wet food to save more on their living costs and not to spend on luxury goods or more expensive items, it is because some of them have lost their jobs, salary deductions from employers and also lost their source of income causing them to save and not shop. This has had a major impact on businesses from various sectors as business profitability has deteriorated due to falling demand for goods and services in the market. Therefore, businesses incur huge losses and should cover such losses should also seek initiatives to save their businesses.

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As a result of the lack of demand for consumer goods and services in the market, consumers began to make a high demand for digital purchases, i.e., online purchases. This is because buying online does not involve any interaction, saves time and reduces travel costs to get daily necessities. For example, the Food panda app, Grab food, Shopee, Lazada and many more present a wide range of options to suit consumer tastes from food to personal items. There is a wide selection of goods and the use of this application on a 24 -hour basis at the same time causing users to focus fully on online purchases. This is also due to all groups regardless of teenagers, adults or the elderly began to use the application online actively and fully. As a result, merchants who trade face -to -face have lost their source of income because consumers prefer to shop online rather than face -to -face. In fact, some of the traders began to tame themselves in online business to prevent their business from falling and collapsing. The effects of movement control orders, movement restrictions and social imprisonment have stifled and halted any economic activity, and some businesses have started to close and go bankrupt and even some of the t...