Wednesday 10 July 2013

The nation’s broadband monopoly : Good or bad?

A monopoly can be defined simply as a market with only one seller and no close substitutes for that seller's product. In this case TM, TM (formerly Telekom Malaysia) is one of the most prominent government listed companies in Malaysia. TM was appointed the main distributor and controller of broadband services by the government in 2009.

Now, why was TM granted control of the broadband business? Because it controls all the telephone lines in the country, resulting in the company having a monopoly.

TM started introducing a new service called ''UNIFI''. A super fast interest using optic fiber cables. Maxis opted to start using these cables as well. In order for Maxis to provide this service, Maxis has to obtain these cables from TM through a contract which is based on TM's terms; amount of cables, speed limit of their internet service and etc.  This is because TM is the monopoly for distributing optic fiber cables in Malaysia.

Being the main controller of telephone lines in Malaysia, it made it difficult for new entrants to the market, even ones with substantial resources such as Maxis to compete with TM.

The lack of competition has sparked a debate among people centered about the service being provided by TM in which, hasn’t been up to scratch. What are the methods to overcome the staleness of the lack of competition in the broadband business?

Now, there are two possible solutions that could have been applied instead of appointing TM as the main controller of broadband services. For starters, the government could have split TM into separate companies for different localities, simillar to how the American government broke up AT&T into several smaller companies. And for a change, the government could also regulate the industry as a whole without dictating how individual firms run their business.

The other would have been to declare TM's monopoly a natural monopoly, and regulate how TM conducts its business to ensure it provided a fair level of service at a reasonable price.

As we all know, competition is the key to driving prices down and increasing the quality and quantity of service provided. With TM established in its monopoly power, competition is effectively stifled.

In my opinion, a change has to be made in order for the nation to progress even further and with the unlimited potential of technology, become an economy giant in the eyes of the world.  

Written by : David Tan Jia Ming ( 0315300 )

References : 

Tuesday 9 July 2013

Soaring Prices of Avocado

Short supply, high demand sees avocado prices soar

Avocado prices are soaring this summer due to short supply and high demand and an industry group says shoppers may face similar pricing for some time to come.
Avocados were selling for $2.49 each on weekdays and at the weekend the avocados were sold at $2.99 each. This is because the DEMAND on weekends is more than the demands on weekdays which is due to a lower SUPPLY
For example:

This graph can also relate to the short supply and high demand of the avocado.
When the price of a good increases, the quantity demanded for the good decreases.   As shown in the graph above, when the price increases from 3 to 8, the quantity demanded decreases from 50 to 16. This shows that there is a negative relationship between the price of goods and the quantity demanded. When there is a short supply of goods, it will increase the demand. This will also cause the price of goods to increase because people are willing to pay for the goods with a higher price than usual.

Example to show how supply and demand affect price  :

Imagine that a bag of avocados were sold at $20. Because the company's previous analysis showed that consumers will not demand avocados at a price higher than $20, so only 20 bags were released because the opportunity cost is too high for suppliers to produce more. If, however, the 20 bags of avocados are demanded by 30 people, the price will subsequently rise because, according to the demand relationship, as demand increases, so does the price. Consequently, the rise in price should prompt more avocados to be supplied as the supply relationship shows that the higher the price, the higher the quantity supplied.

If, however, there are 30 bags of avocados are supplied but the demand is still at 20 bags, the price will not be pushed up because the supply is more than accommodates demand. In fact after the 20 consumers have been satisfied with their purchases, the price of the leftover avocados may drop as producers attempt to sell off the remaining avocados. The lower price will then make avocados more available to people who had previously decided that the opportunity cost of buying them at $20 was too high.

In conclusion, the supply of a product does affect the prices of goods, and vice versa

Written by : Adelynn Yeo Qin Qing (0315293)
Reference :