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Name: KIEU MINH TRI

ID: 151401004

Class: 16BOBA02

Subject: Principles of Microeconomics

Word Count: 2550

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Out line

I. Identification of Malaysias economic system.................................................................. 4-6.

II. Evaluation on Malaysias economic system.................................................................... 6-9.

III. Rationale of Malaysias economic system on utility maximization.................................. 10.

IV. Rationale of Malaysias economic system on pricing....................................................... 11.

mechanism for distribution of goods and services.

V. References and citations .............................................................................................12-13.

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Abstract

Every nation has a specific economic policy and economic systems to development.

Hence, Malaysia is also known as one of the most famous country about its economy as well as
its policy and system.

With good experiences of economy development, this nation is developing in a right way.

According the researches, figures and statistics from 1970s to now, the Malaysia's economic
system is shown clearly about the growth development of it and why the nation has had so many
right policy and strategies as well as the knowledge of methods or ways to perform it.
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I. Identification of Malaysias economic system.

Economy affects the lives of individual and society as a whole. Economic exists to
fulfill the unlimited human need in limited resources. Economic include what should
be produced, how it should be produced and who should produce it. At the most
abstract level, the economy is a system that exists to produce and provide people in a
society with the goods and services they need to live and do what they want. The size
of this system can grow as the population gets larger or as the existing population
gets wealthier. Economists often measure the size of the economy with metrics such as
gross domestic product (GDP), which measures the value of all the goods and
services produced by a country in a year

Economic systems are systems

which organize and structure the
resources being available in a
country or state. 3 types of economic
systems have established consist of
Free Enterprise System, Centrally
Planned or Command System and
Mixed Economy System.

On the another hand that we may consider it can be defined as the means government
trading goods and services. They are used to control the five factors of production,
including: labor, capital, entrepreneurs, physical resources and information
resources. In everyday terms, these production factors involve the employees and
money a company has at its disposal, as well as access to entrepreneurs, the people
who want to run companies or start their own businesses. The physical materials and
resources needed to run a business, along with the data and knowledge companies
use to be successful, are also factors in production. Different economic systems view
the use of these factors in different ways. ( Study.com, Economic systems: Definition,
Types and Examples).
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Economic system in Malaysia is

Mixed Economy System where the
price mechanism rights are hold by
both the public and government. As
well as the degree of government
intervention and the public are at
balance. In this economic system,
most of decisions are made by the
market and some are made by
government which are mostly due
to scarcity for decisions of
petroleum prices, oil price, sugar
price and others. The government
just intervene when getting responsibility to overcome scarcity. In spite of the
government also intervene when there is a new market establishing through Barrier of
Entry., it is necessary for business to organize activity or a new market in Malaysia.
All barriers to entry in Malaysias market are, the control of price, prohibiting from
selling certain goods or services and many more. However, it keeps the economy at
the balance and well growing.

Another functions of this economic is that A mixed economic system protects private
property and allows a level of economic freedom in the use of capital, but also allows
for governments to interfere in economic activities in order to achieve social aims.
According to neoclassical theory, mixed economies are less efficient than pure free
markets, but proponents of government interventions argue that the base conditions
such as equal information and rational market participants cannot be achieved in
practical application. ( Investopedia, Mixed Economic System). (Investopedia.
(2017). Economics Basics: What Is Economics?.)

II. Evaluation on Malaysias economic system.

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The strength of this economic system is in order to keep going on the stable pricing,
government just intervene goods or service by the policy offered to control.
Therefore, the customer may well-enjoy a bout the goods or services at the lower or
stable price. On 16th June 2011, RON 95 was being sold at RM1.9 per liters. Since
customer may enjoy the real income at the lower price, RON95 was a perfect
substitution for RON 97. That is why we can see the rate of selling RON 95 more
than RON97.

The full of customer demand will be fulfill by combining with individuals and
businesses to control the needs of society. This economy will bring more increasing
about the social demand

Malaysia kept the economy growing rapidly and inclusive over many years. As we
know, from 1970 GDP growth of Malaysia's economy is always at 6.4% per each
year. This economy was higher than almost the company within area ( Figure 1) since
it was changed from dependence on agriculture and commodity exports to a more
diversified and open economy.

The reason is that the investment will be coming from both individuals and
governments and as such increasing the investment fund available in such an
economy and the end product will be that the economy will be more positioned to
understand and meet the needs of the customers as both government and individuals
seek for new investment opportunities. (Benneth 2017, Economic system of mixed
economy: a case of Malaysia).
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Note: In panel A, GDP per capita is computed in real USD PPP terms; ASEAN
excludes Myanmar; 1970-2011 data are from the Penn World Tables, 2012-14 data
from the World Development Indicator database. In panel B, the Gini coefficients
have been linearly interpolated for missing years; OECD is an estimate based on
incomplete samples.

Source: World Bank (2016), World Development Indicators (database); Penn World
Tables 8.1 (database); Economic Planning Unit, Malaysia (2016), Socio Economic
Statistics (database).

Malaysia harnessed its favorable geographical location in order to encouraging

regional integration via a relatively open environment to trade and investment
( Malaysia Economic Assessment, OECD Economic Surveys, 2016). This is the reason
for the development of Malaysia's economy including manufacturing and productivity.
By enhancing the recoverable of organizations, as well as extending financial markets
and risk monitoring, the economy decrease too much the risky and welter caused by the
shock of the Asian financial crisis in 1997-98. Malaysia is evaluated on the rank 18th on
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the World Banks Ease of Doing Business 2016 index (World Bank, 2015a) through the
success of economy activities.

The Malaysia's economic policy in 1971 was mixed with growth aspirations in order to
create fair inside of nation. It sought the opportunity for removing the poverty as well as
helping all the Malaysian even with any ethnicity developing together in order to achieve
the ultimate objectives. It also created so many job opportunities for a lot of un-
employees since every year inside of Malaysia has a large number of those. Inside of
2010, government set the objectives that Malaysia's economy will the high profit at 2020
while ensuring inclusiveness and sustainability (NEAC, 2010). There were so much the
participation, assistant maximum at 40% from the government to optimize resource
allocation and avoid the economic distortions.

The growth of labor productivity increase so high, average at 3.7% per year between
2016 and 2020 (EPU,2015). However, recently, the labor productivity has slowed as so
many industries and be defeated by competitors even though higher than the OECD
average. According the news from Malaysia's open market research on a Malaysia's
economic website, Trade is extremely important to Malaysias economy; the value of
exports and imports taken together equals 134 percent of GDP. The average applied
tariff rate is 4.4 percent. Investment in some sectors is restricted, and state-owned
enterprises distort the economy. The financial sector continues to grow, and its
competitiveness is increasing. Supervision of banking has been strengthened, and
measures to liberalize capital markets have progressed. ( Heritage, 2017 Index of
Economic Freedom, 2017).

The weakness of this economic system is the firm just produce when it is really
profitable. Moreover, materials, location and capital need to be checked before
production of goods or services will be performed. It is also considered if the goods or
services like the bus stop, street lighting, and others. Since according the policy is that the
goods or services will being not produced, if being not profitable.
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However, company or enterprise will ignore all social cost by causing polluted air, water
and environment. In Offences Committed under The Environmental Quality Act in 1974
court cases involved the polluted environment is existed so much during 2010 about
49.8% and higher than 2008 about court cases ratio. Some of the government intervention
may lead to cause the corruption and political interference during performance. Hence, it
does not fulfill for the nation's economic as well as satisfaction of Malaysian. There are
more encouraging stable monopoly public finances due to intervention of government
just cause limiting resource and registration goods for some of companies. It also
influences Monopoly and Oligopoly and act against the interest of public about providing
all of goods and services. One of examples is a firm of large economic scale may change
the price higher or limit production since the profit is too normal and do not have any
substitution for goods by the time.

Since the government has already given for this nation firm a higher competitive
advantage than international brand, and limiting the chances of these international brand
to adopt price-based competitive sphere. Since governments can enact certain policies to
favor government manufactures, other manufactures can be at risk of sustaining business
growth Terrence (2004). This is another disadvantage as can be noticed in the
international firms that maintain presence in the country. This is because there is a need
for competitiveness to be on a level ground if these firms are to be profitable, but the note
from all indication is that the chances of these firms to successes are limited as a result of
the limitation in their competitive capacity (Benneth 2017, Economic system of mixed
economy: a case of Malaysia).
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III. Rationale of Malaysias economic system on utility maximization.

Malaysia government perform Penguatkuasaan Akta Kawalan Bekalan 1961 to

control pricing of controlled products. Selling of fossil fuel limited prevent any petrol
company from monopoly the market in large economic scale. The fossil fuel is the main
component for operating motorbike, public transport, and others. However, with a large
scale, fossils fuel is used for operating heavy machinery. The intervention of government
on this price will help so much for Malaysian's daily life, and the reality of price of
RON95 and Diesel were intervened at RM 1.90 and RM 1.8 ( 19th May 2011).

There are some of other example, one of each is to achieve economic welfare by
managing forest for using limited source. Malaysia is one of the largest developing
nations having large forest size and over 59% (19.42 million hectares) of the total
area(Organization World Food and Agriculture Organization - FAO, 2005).

Timber industry of Malaysia is managed and controlled very well by government. Since
better in using land, adequate reserve forests are provided in almost area of nation. The
forest exploitation and Region Permanent Forest are always controlled and checked
carefully in order to protect biological diversity and reduce damage to streams.
Performing of labeling system, in which trees are out of forest will be controlled,
measured and recorded in a right way.

Illegal logged tree stump can easily be identified by referring to central data storage.
Malaysia has enforced the ban of logs export in 1987 for peninsular, and log export
quota in Sabah and Sarawak. Promote the value-added production and downstream
processing in domestic. PRICE MECHANISM ?Normal thing (cheap item) let
marketing decide price (demand & supply set price) ? Government set price,
businessman can sell at lower price but cannot sell more than max price but cannot sell
to cheap cost businessman will suffer loss (e. g. public transport bus government give
subsidy). ( Lawaspect, Economics and Government, 2017).
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IV. Rationale of Malaysias economic system on pricing mechanism for distribution

of goods and services.

Price mechanism is a market based mechanism which is used to merge up buyers and sellers
via price. Price is also used as a signal for fulfill both their wants, and the results will be the
price that the firms and consumers have to accept. Prices will respond to shortages and
surpluses, market equilibrium point occurs when the quantity of demand and supply are equal
and both shortage or surplus will not occurs. Surplus is where the quantity of supplied over
the quantity demanded when the price is above the equilibrium and the shortage is opposite.
Like we defined that supply is the willingness of the seller to sell a good or services.

At the equilibrium price, there will be no shortage or surplus but it may not be the most good
price. If the government sets a minimum price above the equilibrium, surplus will establish
and the price will not be fall to eliminate this surplus. Shortage is also like the surplus, the
price will not be rise to eliminate the shortage. Market can be intervened by the government
on the positive or negative way, but it is intervened not much in Malaysia since it has the mix
economy system.

Market demand pricing mechanism, government keep the perfect price for the market
interest. As well as government always maximize profit for firm such as pricing of fresh fish
effect by weather and location as ikan lumek selling at RM3. 00 per kg at Kpg Goelbilt while
selling at RM. 600 at Kota sentosa wet market ?Brg keperluan (e. g. chicken, sugar)
(Lawaspect, Economics and Government, 2017).
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V. References and citations.

UKEssays. (2017). The Economic Systems Of Malaysia. [online]

Available at: https://www.ukessays.com/essays/economics/analyse-the-economic-

systems-of-malaysia-economics-essay.php [Accessed 11 Aug. 2017].

Heritage.org. (2017). Malaysia Economy: Population, GDP, Inflation, Business,

Trade, FDI, Corruption. [online]

Available at: http://www.heritage.org/index/country/malaysia [Accessed 11 Aug.

2017].

Anon, (2017). [online]

Available at: https://www.oecd.org/eco/surveys/Malaysia-2016-OECD-economic-

survey-overview.pdf [Accessed 11 Aug. 2017].

Lawaspect.com. (2017). Economics and Government. [online]

Available at: https://lawaspect.com/economics-and-government/ [Accessed 11

Aug.2017].

Focus Economics | Economic Forecasts from the World's Leading Economists

(2017). Malaysia Economy - GDP, Inflation, CPI and Interest Rate. [online]

Available at: http://www.focus-economics.com/countries/malaysia [Accessed 11

Aug.2017].

Thomas White International. (2017). Economy in Malaysia | Malaysia Economic

History & Culture | Economy of Malaysia. [online]

Available at: https://www.thomaswhite.com/world-markets/malaysia-

manufacturing-drives-growth/ [Accessed 11 Aug. 2017].
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Study.com. (2017). Economic Systems: Definition, Types & Examples - Video &
Lesson Transcript | Study.com. [online]

Available at: http://study.com/academy/lesson/economic-systems-definition-

types-examples.html [Accessed 12 Aug. 2017].

Ma, R. and You, P. (1966). The economy of Malaysia and Singapore. Singapore:
M.P.H.

Printers Sendirian Berhad.

Radcliffe, B. (2017). Mixed Economic System. [online] Investopedia.

Available at: http://www.investopedia.com/terms/m/mixed-economic-system.asp

[Accessed 13 Aug. 2017].

Benneth, I. (2017). Economic system of mixed economy: a case of Malaysia. [online]

Ilokabenneth.blogspot.com.

Available at: http://ilokabenneth.blogspot.com/2014/04/economic-system-of-

mixed-economy-case.html [Accessed 13 Aug. 2017].

Parikh, V. (2017). Advantages and Disadvantages of Mixed Economy. [online]

LetsLearnFinance.

Available at: http://www.letslearnfinance.com/advantages-disadvantages-mixed-

economy.html [Accessed 13 Aug. 2017].

Investopedia. (2017). Economics Basics: What Is Economics?. [online]

Available at: http://www.investopedia.com/university/economics/economics1.asp

[Accessed 13 Aug. 2017].
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ASSIGNMENT SUBMISSION AND ASSESSMENT

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OUMM3203

Microeconomics
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