ECO 162 MICROECONOMICS

LECTURER NAME:
MISS NAJIHAH ABD AZIZ
NAME:
NUR DAYANA ATHIRAH BT ASHSHAARI (2019413584)
NORAZIMAH BINTI MUHAMMAD RIZUAN (2019262984)
NURROSNA AYUNI BINTI AHMAD NAZRI (2019225204)

CLASS NAME:
AC1101C

1
 CONTENT

NO PARTICULAR PAGE
1 Past year question : October 2016 3-9

2 Answer to past year question 10-21

3 Article : Subsidy 22-23

2
 PAST YEAR QUESTION
OKTOBER 2016

PART A
1. Microeconomics is the study of how
a. Scarce resources are used to satisfy unlimited human wants.
b. We choose to use unlimited resources
c. Unlimited resources are used to satisfy scarce wants
d. Society uses abundant resources to satisfy unlimited wants

2. Which of the following will result to an inward shift if the production possibilities curve?
a. Technological advancement
b. Discovery of new resources
c. A decline in population
d. Economic growth

3. Choose the incorrect statement regarding the classification of goods from Islamic
prespective.
a. Al-Tayyibat refers to pure and clean man-made goods
b. Dharuriyat goods are the goods that necessities to human
c. Tarafiat goods are forbidden except for those with excess income
d. Hajiyyat goods helps man to improve the quality of life

4. Buyers would demand _____________ goods as price decreases, and therefore the
demand curve is ___________ sloping
a. more; upward
b. more: downwards
c. less; upward
d. less; downwards

5. If toothbrush and toothpaste are complementary goods, a decreases in price of

toothbrush will result in
a. An increases in the demand for toothpaste
b. A decreases in the demand for toothpasre
c. An increases in the quantity demanded for toothpaste
d. A decreases in the quantity demanded for toothpaste

6. If the price of good Z increase, the demand curve for its substitute will
a. Shift to the right
b. Shift to the left
c. Upward movement
d. Downward movement

3
7. If the price elasticity of supply for washing machine Is 2.0 , this means
a. A 20% increases in price, leads to 200% decrease in quantity supplied
b. A 2% decreases in price, leads to 20% increases in quantity supplied
c. A 7% decreses in price, leads to 17.5% increase in quantity supplied
d. A 2% decrease in the price, leads to 4% decrease in quantity supplied

8. If the price elasticity of demand for a good is unitary elastic, an increase in the price of
the good will cause the total revenue to
a. Increases
b. Decrease
c. Increase and eventually declining
d. Constant

9. If the cross elasticity of demand between chicken chop and lamb chop is 2.5, then a
6% increase in the price of chicken chop will result in
a. A 10% increase in the quantity demanded of lamb chop
b. A 20% increase In the quantity demanded of lamb chop
c. A 15% increase in the quantity demanded of lamb chop
d. A 4% increase in the quantity demanded of lamb chop

10. A maximum price results in

a. A shortage
b. A surplus
c. Equilibrium
d. None of the above

11. Which of the following measures will assist government in trying to control price
increases of chickens during Raya celebration?
a. Price floor
b. Price ceiling
c. Increases in taxes
d. Decreases in subsidies

12. When the market for goods is in equilibrium

a. The quantity supplied exceeds quantity demanded
b. The quantity demanded exceeds quantity supplied
c. There will be surplus of goods and services in the economy
d. The quantity demanded equals quantity supplied

13. The law of diminishing Returns” starts when

a. Total product begin to fail
b. Total product reaches its maximum
c. Marginal product reaches its maximum
d. Average product reaches its maximum

4
14. Which of the following is a short run adjustment?
a. A local bakery hires two additional workers
b. The numbers of plantations in Malaysia declines by 5%
c. Eight new firms enter the electronic industry
d. Proton constructs a new assembly plant in Melaka

15. If a firm enlarges its factory size and realizes higher average costs of production then,
a. It has experienced the economics of scale
b. It has experienced the diseconomies of scale
c. It has experienced constant returns to scale
d. The long run average cost curve is downwards sloping.

16. Which of the following are the same at all levels of output under perfect competition?
a. Marginal cost and marginal revenus
b. Price and marginal revenue
c. Price and marginal cost
d. Price and average cost

17. In monopolistically competitive market, there will be

a. A single product and price
b. A product group and a range of prices
c. A product group and a single price
d. A unique product with a range of prices

18. In oligopoly, kinked demand curve explains

a. Ideal price
b. Falling prices
c. Price rigidity
d. The variation of prices

19. A perfect competitive firm will shut down the operation if

a. AR equals to AVC
b. AR is less than AC
c. AR is equal to AC
d. AR is less than AVC

20. For a monopolist to practice effective price discrimination, one of necessary condition
is
a. Identical demand curves among groups of buyers
b. Differences in the price elasticity of demand among groups of buyers
c. A homogeneous product
d. Demand is equal to average revenue and price

5
 PART B
QUESTION 1
The diagram shows the supply and demand curve of good A for a firms. When a specific tax
of RM3 is imposed, the supply curve shifts from S0 to S1.
Price of goods A (RM)
S1
S0
4.00
3.00

x
D0
Quantity of Good A (units)
100 200

a) Find the Equilibrium price an quantity of good A before and after the tax was imposed. What Is
the value of x.
b) From the above diagram, who will pay more tax? Why
c) Calculate the total tax paid by consumers and sellers
d) Calculate the total tax revenue received by government

6
QUESTION 2

The following table shows the relationship between Good X, Good Y and consumer’s
income.

Price of good Quantity Quantity Quantity Consumer’s

X (RM) demanded for supplied for demanded for income per
good x (unit) good x (unit) good Y (unit) month (RM)
160 24 75 50 2500
150 28 64 45 2000
120 32 42 40 1500
90 36 31 35 1000
60 40 25 30 500

a) Calculate the price elasticity of demand for good X when its price increases from
RM 120 to RM 150. Is the demand for Goodx is elastic or inelastic?

b) Calculate the cross elasticity of demand for Good Y when the price of Good X
rises from RM 90 to RM 150. Determine the relationship between Good X and
Good Y.

c) Calculate the price elasticity of supply for Good X when its price decreases from
RM180 to RM120. Is the supply elastic or inelastic?

d) Calculate the income elasticity of demand for Good X and the income incrases
from RM 2000 to RM2500.

e) By using a suitable diagram, differentiate between inelastic and elastic supply.

7
QUESTION 3

Quantity Total Cost Total Variable Average Cost Marginal Average

(TC) Cost (TVC) (AC) Cost (MC) Fixed Cost
(AFC)
0 RM 70 RM 0
1 90
2 130
3 180
4 250
5 340

a) Complete the above table

b) Is this firm operating in the short run or long run? Why?

c) Sketch the AFC, AC and MC in one diagram

QUESTION 4
Price (RM) Quantity Marginal Costs Total revenue Marginal
Demanded (RM) (RM) Revenue (RM)
(units)
100 1 45
83 2 43
71 3 40
63 4 39
55 5 40
48 6 44
42 7 47
37 8 53
33 9 58
29 10 65

a) Calculate total revenue (TR) and marginal Revenue (MR)

b) Determine the profit maximizing price and quantity for this firm
c) At the profit maximizing output, calculate the profit or loss for this firm, Given the total
cost is RM 300
d) Explain why the demand curve of monopolist is downward sloping and has inelastic
demand curve
e) Explain the profit obtained by this firm in the long run.

8
PART C
QUESTION 1
a) Define mixed economy system and explain four advatanges of this economy system.

b) Discuss four determinats of supply that cause the supply s=curve to shft. Illustrate your
answer with diagrmas .

QUESTION 2
a) Using diagrams, discuss the changes in quantity supplied and changes in supply.

b) Explain four factors that affect the price elasticity of demand

QUESTION 3
a) Explain briefly the effect an dgive examples of goods that being control under the price
ceiling in the economy and discuss two disadvantages of it to the consumers.

b) With an aid of well-labeled diagram, describe briefly the three stages of production.

QUESTION 4
a) Monopoly and monopolistic can be differentiated through its characteristics. Explain
any two characteristics from monopoly an dmonopolistic competition respectively.

b) Discuss with the aids of the diagrams why a perfectly competitive firm earns a normal
profit in the long run.

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 ANSWERS TO PAST YEAR

1. Microeconomics is the study of how

a. Scarce resources are used to satisfy unlimited human wants.
b. We choose to use unlimited resources
c. Unlimited resources are used to satisfy scarce wants
d. Society uses abundant resources to satisfy unlimited wants

2. Which of the following will result to an inward shift if the production possibilities curve?
a. Technological advancement
b. Discovery of new resources
c. A decline in population
d. Economic growth

3. Choose the incorrect statement regarding the classification of goods from Islamic
prespective.
a. Al-Tayyibat refers to pure and clean man-made goods
b. Dharuriyat goods are the goods that necessities to human
c. Tarafiat goods are forbidden except for those with excess income
d. Hajiyyat goods helps man to improve the quality of life

4. Buyers would demand _____________ goods as price decreases, and therefore the
demand curve is ___________ sloping
a. more; upward
b. more: downwards
c. less; upward
d. less; downwards

5. If toothbrush and toothpaste are complementary goods, a decreases in price of

toothbrush will result in
a. An increases in the demand for toothpaste
b. A decreases in the demand for toothpasre
c. An increases in the quantity demanded for toothpaste
d. A decreases in the quantity demanded for toothpaste

6. If the price of good Z increase, the demand curve for its substitute will
a. Shift to the right
b. Shift to the left
c. Upward movement
d. Downward sloping

10
7. If the price elasticity of supply for washing machine Is 2.0 , this means
a. A 20% increases in price, leads to 200% decrease in quantity supplied
b. A 2% decreases in price, leads to 20% increases in quantity supplied
c. A 7% decreses in price, leads to 17.5% increase in quantity supplied
d. A 2% decrease in the price, leads to 4% decrease in quantity supplied

8. If the price elasticity of demand for a good is unitary elastic, an increase in the price of
the good will cause the total revenue to
a. Increases
b. Decrease
c. Increase and eventually declining
d. Constant

9. If the cross elasticity of demand between chicken chop and lamb chop is 2.5, then a
6% increase in the price of chicken chop will result in
a. A 10% increase in the quantity demanded of lamb chop
b. A 20% increase In the quantity demanded of lamb chop
c. A 15% increase in the quantity demanded of lamb chop
d. A 4% increase in the quantity demanded of lamb chop

10. A maximum price results in

a. A shortage
b. A surplus
c. Equilibrium
d. None of the above

11. Which of the following measures will assist government in trying to control price
increases of chickens during Raya celebration?
a. Price floor
b. Price ceiling
c. Increases in taxes
d. Decreases in subsidies

12. When the market for goods is in equilibrium

a. The quantity supplied exceeds quantity demanded
b. The quantity demanded exceeds quantity supplied
c. There will be surplus of goods and services in the economy
d. The quantity demanded equals quantity supplied

13. The law of diminishing Returns” starts when

a. Total product begin to fail
b. Total product reaches its maximum
c. Marginal product reaches its maximum
d. Average product reaches its maximum

11
14. Which of the following is a short run adjustment?
a. A local bakery hires two additional workers
b. The numbers of plantations in Malaysia declines by 5%
c. Eight new firms enter the electronic industry
d. Proton constructs a new assembly plant in Melaka

15. If a firm enlarges its factory size and realizes higher average costs of production then,
a. It has experienced the economics of scale
b. It has experienced the diseconomies of scale
c. It has experienced constant returns to scale
d. The long run average cost curve is downwards sloping.

16. Which of the following are the same at all levels of output under perfect competition?
a. Marginal cost and marginal revenus
b. Price and marginal revenue
c. Price and marginal cost
d. Price and average cost

17. In monopolistically competitive market, there will be

a. A single product and price
b. A product group and a range of prices
c. A product group and a single price
d. A unique product with a range of prices

18. In oligopoly, kinked demand curve explains

a. Ideal price
b. Falling prices
c. Price rigidity
d. The variation of prices

19. A perfect competitive firm will shut down the operation if

a. AR equals to AVC
b. AR is less than AC
c. AR is equal to AC
d. AR is less than AVC

20. For a monopolist to practice effective price discrimination, one of necessary condition
is
a. Identical demand curves among groups of buyers
b. Differences in the price elasticity of demand among groups of buyers
c. A homogeneous product
d. Demand is equal to average revenue and price

12
 PART B
QUESTION 1
The diagram shows the supply and demand curve of good A for a firms. When a specific
tax of RM3 is imposed, the supply curve shifts from S0 to S1
Price of goods A (RM)

4.00
3.00

x
D0
Quantity of Good A (units)
100 200

a) Find the Equilibrium price an quantity of good A before and after the tax was imposed.
What Is the value of x.
Before tax
equilibrium price : RM3.00
Equilibrium quantity : 200units
After tax
equilibrium price : RM4.00
Equilibrium quantity : 100units
X = RM1.00
b) From the above diagram, who will pay more tax? Why
Supplier. Because the demand is more elastic than supply
c) Calculate the total tax paid by consumers and sellers
consumer = [RM4.00-RM3.00]x100
=RM100
Sellers = [RM3.00-RM1.00]x100
=RM200
d) Calculate the total tax revenue received by government
M100+RM200=RM300

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 QUESTION 2

The following table shows the relationship between Good X, Good Y and consumer’s
income.

Price of good Quantity Quantity Quantity Consumer’s

X (RM) demanded for supplied for demanded for income per
good x (unit) good x (unit) good Y (unit) month (RM)
160 24 75 50 2500
150 28 64 45 2000
120 32 42 40 1500
90 36 31 35 1000
60 40 25 30 500

a) Calculate the price elasticity of demand for good X when its price increases from
RM 120 to RM 150. Is the demand for Goodx is elastic or inelastic?
[28-32/32] / [150-120/120]
=0.5 (inelastic)

b) Calculate the cross elasticity of demand for Good Y when the price of Good X
rises from RM 90 to RM 150. Determine the relationship between Good X and
Good Y.
[45-35/35] / [150-90/90]
=0.43 (independent goods)

c) Calculate the price elasticity of supply for Good X when its price decreases from
RM180 to RM120. Is the supply elastic or inelastic?
[42-75/75] / [120-180/180]
=1.33 (elastic)

d) Calculate the income elasticity of demand for Good X and the income incrases
from RM 2000 to RM2500.
Y= [50-45/45] / [2500-2000/2000]
=0.44

Z= [24-28/28] / [2500-2000/2000]
=-0.57

e) By using a suitable diagram, differentiate between inelastic and elastic supply

elastic inelastic

14
QUESTION 3

Quantity Total Cost Total Variable Average Cost Marginal Average

(TC) Cost (TVC) (AC) Cost (MC) Fixed Cost
(AFC)
0 RM 70 RM 0
1 160 90 90 90 70
2 200 130 100 40 35
3 250 180 83.33 50 23.33
4 320 250 80 70 17.5
5 410 340 82 90 14

a) Complete the above table

b) Is this firm operating in the short run or long run? Why?
This firm is operating in the short run because it has fixed cost.
c) Sketch the AFC, AC and MC in one diagram

AC/AFC/MC

MC

AC
AFC
QUANTITY

d) Give any one example each for variable cost and fixed cost
variable costs: raw materials
fixed cost: land

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Question 4
The table below shows the demand and cost of a monopolist.

Price Quantity Marginal Total Marginal Revenue (RM)

(RM) Demanded Costs (RM) Revenue
(Units) (RM)

100 1 45 100 0
83 2 43 166 66
71 3 40 213 47
63 4 39 252 39
55 5 40 275 23
48 6 44 288 13
42 7 47 294 6
37 8 53 296 2
33 9 58 297 1
29 10 75 290 -7

a) Calculate the total revenue (TR) and Marginal Revenue (MR)

b) Determine the profit maximizing price and quantity for this firm
MR=MC
Profit Maximizing Price = RM63
Profit Maximizing Quantity = 4 Units
c) At the profit maximizing output, calculate the profit or loss for this firm. Given the
total cost is RM300.
Profit or Loss = Total Revenue – Total Cost
= 252 –-167
= 85
d) Explain why the demand curve of monopolies is downward sloping and has inelastic
demand curve.
The demand curve of monopolies is downward sloping because it is the market demand
curve. Other than that, it is because marginal revenue is less than price.
The demand curve of monopolies is an inelastic demand because the monopolies are
price maker in the market. Thus, they are not sensitive towards the changes of prices of
products in the market.
e) Explain the profit obtained by this firm in the long run
In the long run, this firm will only making supernormal profit. This is because the
characteristics of the firm which is barriers to entry and price maker. With barriers to
entry, there are legal restrictions in entering the market , no firm can enter the market.
With price maker, the monopolist can control the price so that they can achieve the
profits they want to earn

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PART C
QUESTION 1
a) Define mixed economy system and explain four advantages of this economy system.
Mixed economy system is a combination of both capitalist and socialist system,
where both government and individuals play their role in the country. The government
also participates in the economy by promoting economic stability and growth, providing
certain goods and services.
The advatages of mixed economy is the price of goods is being control by the
government so that the price is not too expensive. Next the advatages of mixed economy
is the government allowed to own a private property. It is because the government will
provide assistance, infrastructure to encourages them open business. This can help to
solve the economic problems. The third mixed economy advantages are both the public
and private can operate equally and fairly. The last one advantages are the government
controls income to reduce income disparity.

b) Discuss four determinants of supply that cause the supply curve to shift. Ilustrate
your answer with diagram.
P

S1 S0 S2

QUANTITY
Q1 Q0 Q2
Y
There are some of determinats of supply. The first one is resource prices. The higher
resources prices will increase the production costs and reduce the profit. Because of that the
supply curve, S0 will shift to S1 because of the decrease in supply. If the resource price is
lower, the production cost will decrease. So the supply curve will shift S0 to S2 because the
increase supply.
Next is techonology. When have improvement in techonolgy and it will increase the
firms productions. So the supply curve will shift to the right, S0 will shift to S2. If they have
older techonolgy, it will reduce the productivity and it will decrease the supply. So S0 will
shift to left S1.
The third one is taxes and subsidies. The higher the taxes, the higher the production
cost and lower the supply. So the supply curve S0 will shift to the left S1. In the opposite of
subsidies, the higher the subsidies, it will lower the cost of production and higher the supply.
So the supply curve will shift S0 will shift to S2.
The last one is number of seller. As more firms enter the market cause the supply
curve to shift to right, S0 will shift to S2. This is because it has increased the supply at all
prices. So when firms is leaving the market will cause the supply curve will shift to the left,
S0 will shift to S1.

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 QUESTION 2

a) Using diagrams, discuss the changes in quantity supplied and changes in supply.

S1 S0 S2

Quantity
Q1 Q0 Q2

Changes the supply means a change in the entire schedule or a shift or the entire curve. The
change of supply changes because in one of determinants of supply such as number of
sellers, techonology, resource prices, taxes and subsidies, expectation and prices of other
goods. When the supply curve shift to right, (from S0 to S2) it called the increase in supply.
Meanwhile when the supply curve shift to left, (from S0 to S1) it called the decrease in
supply.

Price (RM)
SS
Z
P2

P0 Y

P1 X

Quantity
Q1 Q0 Q2

Changes in quantity supplied is a movement from one point to another point. Change in
quantity supplied happens when changes of price of a product. When the price increase
from P0 to P2, the quantity of supplied is increased from Q0 to Q2. This is being called as
expansion of supply. When the price is decreased from P0 to P1, the quantity of supplied
decrease from Q0 to Q1. This is being called as reduction or contraction of supply.

18
 b) Explain four factors that affect the price elasticity of demand.
One of the factors that affect the price elasticity of demand are number of substitute. When
there has many number of substitute, DD is elastic because many have choices, they are
responsive or sensitive towards the changed in price. When they have less number
substitute, the DD is inelastic. It is because the they have less choice so they are
unresponsive towards the changed in price.
Next is proportion of income level. When the price changed it will affect higher increased in
consumer expenses, DD is elastic because it has the larger impact on consumer income. It
also will affect smaller increased in consumer expenses, DD is inelastic, because it has less
impact on consumer income.
After that is the status of the goods (luxuries versus Necessities). When the price changed,
the effect of demand curve for luxury goods is significant to the consumers. It is because the
goods are not the basic needs of the consumers, DD is elasctic. It also will effect the
demand for necessity goods is insignfinicant to the consumer because the goods are basic
needs. It also are important to the consumers, DD is inelactic.
The last one is time. When the price changed in the long run, DD is elastic because the
consumer has more time to adjust and be able to find better substitute. Meanwhile in the
short run, DD is inelastic because the consumer has less time to adjust and not enough time
to find a better substitute.

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Question 3
a) Explain briefly the effect and give examples of goods that being control under the
price ceiling in the economy and discuss two disadvantages of it to the customer (10
marks)

Price ceiling or also known as maximum price effect in the economy as this intervention
will control inflation. Price ceiling also enable consumers to obtain some essentialmgoods or
service when they cannot afford to buy the goods at the equilibrium price. There are a few
goods that being control under the price ceiling in the economy such as sugar and chicken .
There are disadvantages of price ceiling which is it will encourages illegal black market ,
in where consumers are willing to pay higher than ceiling price or to bribe producer to
overcome shortage. Next, the disadvantage of price ceiling is shortage occured.

b) With and aid of well-labeled diagram, describe briefly the three stages of production

STAGE 1 STAGE 2 STAGE 3

TP

AP

MP

The first stage begin from the source until the intersection of AP and MP when AP is at
maximum. The capital is underutilized because there are not enough workers to operate all of the
machines. There are also waste of resources because the firm incurs costs for underutilized capital
due to lack of labor.
The second stage start from intersection of MP and AP until MP=0 as TP reaches its maximum.
This is the most efficient stage of production because the combination of inputs are fully utilized.
There are enough number of workers and no machines are left idle.
The third stage start when MP=0 and continue to decline as TP start to decline. The capital is
overutilized . The workers are more than enough and factory may be too crowded for any work to be
done efficiently. Thus, producer should not operate in this stage as in this stage the cost increasing
but income is decreasing.

20
Question 4
a) Monopoly and monopolistic can be differentiated through its characteristic. Explain any
two (2) characteristics from monopoly and monopolistic competition respectively.

Monopoly is the market structure that consists of a single firm industry , which is the sole
producer of a product and its product has no close substitutes. Monopolistics competition is
many sellers selling differentiated products.
The first characteristic that can be used to differentiate monopoly and monopolistic
market structure is entry and exit restriction. In monopoly market structure, there are
restrictions for newcomers to enter the industry because the capital requirements is high and
the firm in the monopoly market structure is a big firm with economy scale. While in
monopolistic market structure , there is no restriction to enter and exit the industry because
the capital requirements are low in monopolistic market structure and they are typically small
firms with no power in economy scales.
The second characteristic that can be used to differentiate monopoly and
monopolistic market structure is the number of seller in the market. In monopoly market
structure , there is only one firm in the market which is the only producer of a specific
product . In monopolistic market structure, there are relatively large number of sellers that
produces close substitute product which is slightly different from competing products

b) Discuss with the aids of the diagram why a perfectly competitive firm earns a normal
profit in the long run

A perfectly competetive firm earns a normal profit in the long run because factors in the
long run are perfectly mobile allowing long term adjustment to changing the price equal to
minimum average total cost.
In the long run equilibrium, entry eliminates economics profits. As in the short run the
firms ejoyed the economics profit and this will attract new firm to enter the market. The
entries of new firm will make the supply increase and force the P back to minimum ATC
where the profit is zero and there will be no more entry.
Next, in the long run equilibrium, exit eliminates losses. As in the short run the firms
incur losses because P<ATC and this will cause the firm to leave the market. As the number
of firms decrease the supply the decrease and force the P back to equality with minimum
ATC where the profit is zero and there are no more exit.

21
INTRODUCTION
A subsidy is a benefit given to an individual, business, or institution, usually by the
government. Subsidy also an incentive from the government to encourage producers or
sellers to produce more because subsidy will lower the cost of production and increase the
profit to producer. It is usually in the form of a cash payment or a tax reduction. The subsidy
is typically given to remove some type of burden, and it is often considered to be in the
overall interest of the public, given to promote a social good or an economic policy.

SUMMARIZATION
This suggestion brings many benefits to the BSH recipients. Mainly for those
recipients who have financial problems. This would help decrease their burden on going to
work, sending their children at school and many more. They also had extra money to do
something else such as servicing their car, buy groceries and necessary needs.
Government gives subsidy to petrols for the people that can't afford the petrols at
equilibrium price. This intervention helps peoples especially those who are using petrols for
their cars and motorcycles to consume the petrols with affordable price. This benefits the
consumer especially normal people.
Based on the data in the article, the subsidy were given to a certain group of people
that own a car, a motorcycle or both. The subsidy also will be given if they have a valid road
tax. For those who have both of car and motorcycle the subsidy will be given who which
have higher usage. In Pennisular Malaysia, subsidy will be given to RON 95 to qualified car
owner since the usage of RON 95 is more higher compared than RON97. The government
will paid the subsidy by banked directly to the recepients account and it will be paid every
four month.
In conclusion when government gives petrol subsidy, the producer and the buyers is
enjoy the beneifts. Where the buyers pay less and get to consumed the petrol at affordable
price. The producer will enjoy as the subsidy will lower the costs and increase the profit. So
the demand and supply increase equally as both parties enjoy the benefits of subsidy.

22