Economy Systems

North Korea, one of the final countries using 

Command Economy System

As you can see in the title, we’ll be discussing about the command system. So let’s get to know the basic of this philosophy that may be going ‘extinct’ as less countries are using such economy system. To know this economy system, people have to understand that in this command system, government is superior. The government controls the entire production. Thus shaping the government into becoming the economy. The government controls everything from;-

Who associates the interventions and establishment towards one another?

What to produce?

When to produce concerning to the statistics streams?

How are the outputs produced?

For whom to produced?

North Korea stands as one of the last countries which still practice command economy system. North Korea is largely isolated and disengaged from the world’s economy. Data collection is extremely challenging, and reported statistics on the economy remain largely speculative, requiring careful evaluation. North Korea’s economic freedom score is 1.5, making its economy the least free in the 2013 Index.

   

                 “Pyongyang, capital and economic centre of North Korea”

 

From my point of view, the North Korea economic system isn’t literally as what we typically favour as it is, which is a centrally planned economy. Kim Jong-eun is the dominant and supreme leader of North Korea, where everything is answered is answered by him. He controls the entire economy of the country. To make the job easier for the authorities, the government comprises groups of committees to handle certain tasks. This community is called the “State Planning Committee” which consist of top government officials. They assume that the whole natural, capital and labour resources are theirs to own and do as they please.

North Korea rests an “dyed-in-the-wool” and in actual fact it is a closed dictatorial state. In spite of investigating with some of the market reorganisations over the past few years, a structure of state command in addition to control that endorses the command’s long-lasting Seon'gun, which is the “military first” strategy is the world’s utmost bottled-up economy. Every single trait of the economic movement is strongly controlled by “The Workers’ Party”. The underprivileged people are severely reliant on the command sponsorships in accommodation as well as food provisions, and besides that the state-run regulating structure has depreciated knowingly in the fresh years.

The second point is more to concern about the scheming of general revenue measurements for North Korea which specified as the great losses of goods among genuine consumption and the stage of production. For example, from the case of fishing, although it is exact for considerable of the agricultural sector, there was substantial decomposing and record reduction in the course of storage, dispensation and delivery. Enhance in padding of statistics, it is obvious that the statistics is needed to be reviewed to a more perfectly redirect actual consumption.

Above all, there are also other countries that also uses this economic system which is the command system, as an example:- 

 i) Cuba 

  

ii) Russia

 

Further information can be located at :-

North Korean's Leader - NY Times
Economy of South Korea

Written by

Raja Nur Marisa  0315305

Monopoly

Tenaga Nasional Berhad (TNB) plays Monopoly in Malaysia?

Tenaga Nasional Berhad (TNB) is the only firm in Malaysia, which supplies electricity to individuals as well as households. This firm is the only electricity supplier that exists in Malaysia. This proves that TNB is a monopoly business in the industry.

One of the reason why, is because a company requires to invest a huge amount of money in order to become an electric supplier. A huge capital is needed mainly for the start-up of power plants with high electric capacity of megawatts. 

 

Manjung Coal 
Power Plant

   


    Hydroelectric in Sabah






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Do you ever think why TNB is the only electric supplier? And do you ever wonder why other companies that would like to start an electricity supplying business, couldn't achieve their goal even thou they have more capital than TNB? All of these are because there are several barriers that prevent them from doing so. One of the barriers would be the legal barrier to entry of patents or/and licenses own by TNB. As a result, TNB have gotten the license of operating the business. In this way, TNB will be the only firm to supply electricity in order to maintain a healthy market.

Furthermore, new firms will also be blocked by the barrier of government directive from entering into certain industries. However, the authorities provide special treatment for monopoly companies. The government imposed a regulation where the possibility of other new firms to enter the industry are likely impossible or very difficult. With the government in its side, this sets TNB as the only legal electricity supplier in the country.

Apart from that, there is another barrier that prevent the new firms from entering the industry to compete with TNB, TNB has then ownership for scarce raw materials. This inhibits other firms from undergoing work using the same limited inputs. Therefore, the single firm, TNB, is able to control the industry comprehensively as it owns the entire supply required for production. To prove this, TNB has access to the cheapest raw material, which is coal used to generate electricity in Malaysia.

 

In addition, production cost of electricity will conclusively increase if there were more competition in the industry. In assumption that there are oppositions; it would definitely contribute to higher price of resources, such as coal. Due to the reason that coal is a scarce raw material, coal suppliers would likely sell coal at a higher price and to the highest bidder. This will increase both production cost and cost of product, electricity.

Based on the graph where production at the Marginal Revenue (MR) = Marginal Cost (MC) output. In order for the firm to obtain maximum profit, the price must be set at the point where it touches the demand curve and must be above the Average Total Cost (ATC). As a result, TNB will be able to gain supernormal profit if it remains as the monopoly firm in the industry.

TNB as a monopoly company is also a price maker because this one and only company controls the whole industry. Where it is able to determine the prices, either to be maintained, rise or fall in the future.

In conclusion, with everything in its favor, TNB is not wary to any competition. Inasmuch as the evidence I composed, it is unlikely for any competitors to appear.

--> To learn more concerning the monster electric company, TNB, you may refer to the site displayed:

TNB HOMEPAGE

Written by

Danny Chow  0315607

Price Elasticity

Mineral Water Can Be A Luxury!!!

Necessities are defined as something you are required to have in order to live. More detailed as something compulsory and obligatory for a person to possess. However, luxuries are desirable but also inessential products that are consumed. Human are capable to survive without the consumption of luxuries. However, people tend to buy luxuries for various reasons, such as for upgrading their social class.

Water is one of the nature’s best and most important gifts to mankind. It is essential for humans in order to live, survival depends on drinking water. On the other hand, water is completely needed for our body to function properly, such as for regulation of blood. It is necessary for a person to consume water as it is beneficial for their health. Hence, water becomes a main component in determining the quality of people’s life. Today, people are concerned about the quality of water they drink.

 

Although water has become a necessity in human’s life, but it may also become a luxury. Bling H2O is the most expensive and exclusive mineral water brand in the world. According to the survey, it is consumed about 200 billion bottles of mineral water in the world and creating a business of $60 billion. The product is strategically positioned to target the expanding super-luxury consumer market. 

 

   
Differences

Necessities tend to have a more inelastic demand. However, luxury has an elastic demand. This is because necessity is truly needed for a person’s survival. However, luxuries are just fancy items bought by people who are interested to upgrade their social class. Luxuries are inessential but necessities are essential. For example, if a person were to walk 3 kilometers without any drink of water, if he were to choose either to buy normal mineral water or Bling H20, it is more understandable if he were to buy the normal mineral water. This is because; water is water, no matter what the price is.

In this post, I have mentioned about how necessities and luxuries stand for and the effects in our life. Although mineral water is essential and necessary to people, but the Bling H2O definitely stand as a luxury. This is because people will always find it difficult to decide decisions on whether to purchase a product in a higher price. People WILL absolutely buy mineral water, no doubt about it. However, to purchase the same water in a higher price is just unnecessary and a waste of money. Therefore, making Bling H2O an elastic demanded product. However, normal mineral water is necessary. Hence, it is inelastic demanded.
 

For further information and details about Bling H2O, please access into the link which is provided below:
Bling H2O Page

Written by

Lee Iak Yeng  0314903

Supply & Demand & Market Equilibrium

DIAMOND’S FUTURE

The supply and demand concept including the market equilibrium is known as some of the most basic topics in economics. In this post, I will divulge a post that is suitable and eligible to be related to these topics.

My question here is what are the factors that affect the supply and demand of De Beers’ Diamonds in 2014 and following years? De Beers’ is known as the world’s leading diamond company. My post presents this huge company based on trusted sources. This topic will explain what will happen to the demand and supply of diamonds, throughout 2014.

In my observation, the supply of diamonds by De Beers’ will absolutely increase. This is because De Beers’ had invested in a new diamond mine in South African. This mine will begin production in 2021. The company estimates that the new mine will yield 96 million carats of diamonds. Thus, the supply for diamonds will increase in the future.

Other than that, I’m guessing that the demand for diamonds will decrease. This may be due to customer’s expectation. Starting from the year 2014 henceforth, De Beers’ plan to increase the price of diamonds by 6%. Thus, customers may find the new price of diamonds more that reasonable. Furthermore, De Beers’ was accused of manipulating the price of gems. There was also the ‘Blood Diamonds’ – De Beers’ Conspiracy that hit the world in 2006. I’m sure that after this kind of sensitive issues, customers are unwilling to buy such unethical diamonds from De Beers. Thus, making the demand decrease.

When the supply of the diamonds increase, assuming that the demand curve remains constant, the supply curve will shift to the right.
However, when the demand of diamond decrease, with the assumption of the supply staying constant, the demand curve shall shift to the left.
Higher supply and lower demand would lead to a lower equilibrium price of diamonds.

After a few years, the supply will increase, however, the demand will decrease for De Beers’ diamonds. This situation happens when the supply of a product is higher compared to the demand of the product. In my opinion, De Beers’ would make a wiser choice to decrease either their production or the price of diamonds.

In conclusion, De Beers’ would face a major financial problem regarding their sales if they do not act now.

To obtain more information regarding this topic and the monster company, De Beers’, issues, please refer to the following links stated below:

·      De Beers' Investing in South African

·      Blood Diamond - De Beers' Conspiracy

·      Settlement Against De Beers'

Written by

Atiqah Jea  0314814