Sugar subsidy reduced for people’s good
The article ‘ Sugar subsidy reduced for people’s good was taken from the newspaper, New Straits Times which was dated on 2nd October of 2012. The Malaysian Prime Minister, YAB Datuk Seri Najib Razak announced that there will be a sugar subsidy reduction by 20 cents which took into consideration that 2.6 million Malaysian are diabetic patients during the presentation of the 2013 Budget table in the Dewan Rakyat on 28th September 2012. So,the price of the sugar will be increasing from RM 2.30 to RM 2.50 per kilogramme. The reduction of 20 cent per kilogramme in sugar subsidy is not to burden the people but it is done for their own good, says the Domestic Trade, Cooperatives and Consumerism Deputy Minister, Datuk Tan Lian Hoe (New Straits Times, 2012).
Price floor is a regulation which is imposed by the government that makes it illegal to trade at a price lower than a specified level which is the minimum price. If the price floor is set below the equilibrium price, it has no effect at all. The market works as if there were no price floor but if the price floor is set above the equilibrium price, then it has powerful effects. Normally, the price floor is set above the equilibrium price (Thava, 2012). So, for in this sugar case, government have used the price floor method. By increasing the sugar price, the government hopes that the peoples of this nation or also citizens of this nation will cut down the amount of sugars they consume. We also know that our country is the 8thhighest consumer of sugar in the world and the 4th highest in overall Asia, which is not something to be proud of (Mohamad Faizal Bin Mohamad Niza, 2012). The World Health Organization (WHO) recommends us to take only 5o grammes of sugar daily but we, our nation takes about 51 grammes daily which clearly exceeds the recommendation of the World Health Organization. So, with all this government hopes that people do not really think the 20 cent of sugar subsidy as a burden for them. By doing all this, our society consumes less sugar, and then the government also can save on the sugar subsidies.
According to the Economics textbook, quantity demanded is the amount of goods and services that the consumer willing to buy at a given price and in a set of time. So, for this case, the amount of sugar will be the product that consumers are willing to buy at a given price and in a set of time. To know more clearly about the relationship between the price and the quantity demanded, law of the demand will be the best way to be explained. The law of the demand actually means that the inverse relationship between the demand price and the quantity demanded which is also known as the ceteris paribus. This fundamental economic principle indicates that as the price of a commodity decreases, then the quantity of the commodity that buyers are able and willing to purchase in a given period of time, if other factors are held constant, increases. This law is incredibly important to the study of economics. Even if you compiled a top ten list of economically important laws, the law of demand would be right there at the top (glossary.econguru.com, 2012).
From this article, I will not agree a part where our Domestic Trade, Cooperatives and Consumerism Deputy Minister, Datuk Tan Lian Hoe said that the reducing of subsidies by the government should not be an excuse for retailers to increase the price of sugar. Now my question is, why it can’t be an excuse to increase the sugar price by 20 cents which is from RM 2.30 to RM 2.50 ? From this, clearly the people will know that if the supplier decreases the quantity supplied of the sugar, it will definitely increases the quantity demanded of sugar. If this really happens, there will be a clear cut increase in the shortage of sugar in the society. So, as for this case, we should apply the concept called the law of supply. The law of supply is actually the direct relationship between supply price and the quantity supplied which is also better known as the ceteris paribus. This fundamental economic principle indicates that as the price of a commodity increases, then the quantity of the commodity that sellers are able and willing to sell in a given period of time, if other factors are held constant, also increases as well. We all also should know that this law is not quite as iron-clad as the law of demand but it is also quite important to the study of markets (glossary.econguru.com, 2008).
However, the price will somehow eventually rise up when there is a lot of demand on sugar because of shortage of sugar. The government has to find a way to stop this immediately because it might cause a big problem in the society or better to be said as among the society. There is no point for the government to ask the suppliers or the retailers to stop increasing the price because they will never listen and will continue being stubborn because they can’t make money or make profit if they do not sell in higher price. The best way that government has to choose is by following the economic concept, price ceiling. Price ceiling is a legally established maximum price. The government is occasionally inclined to keep the price of one good or another from rising too high. Some of the examples would be apartments, gasoline and also natural gas. While the goal is invariably a noble one, like keeping stuff for people, a price ceiling plays a role by does more harm than good. At first, it usually creates a shortage, meaning that many of the buyers who being protected against high prices, can’t even buy the good they want. As for second, as a consequence of this shortage, a price ceiling is likely to generate a black market where the good is sold illegally above the price ceiling (glossary.econguru.com, 2008). If this concept is certainly followed, it will be a good way for all the parties. It won’t be a move that leads to burden any of the sellers or retailers but it will be a way to help our beloved society. If this is not to followed, then the seller might put a higher price which will definitely all the parties especially the consumers.
In conclusion, I would like to say that this case has some positive and negative impact in its own way. First of all, we need to understand that sugar is a necessity product in our country but we do not know how effective it is even if the sugar price increases. Some people, mostly rich peoples does not really care no matter what happens to the price. This is because they do not even know what is happening out there in our country. All there need is sugar. They will spend no matter how much to get it. This has to be stop. Everyone must know about this very well and must really take care of our country and what’s going on out there.
References
New Straits Times. (2012). Sugar subsidy reduced for people's good.Available: http://www.nst.com.my/latest/sugar-subsidy-reduced-for-people-s-good-1.151472. Last accessed 5th June 2013.
Economic Glossary. (2008). Price Ceiling. Available: http://glossary.econguru.com/economic-term/price+ceiling. Last accessed 7th June 2013.
Bicycle Campaign. (2012). Why sugar subsidy should be withdrawn immediately. Available: http://www.consumer.org.my/index.php/focus/sugar-and-diseases/403-why-sugar-subsidy-should-be-withdrawn-immediately. Last accessed 1st July 2013.
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