Function and role of Bank Negara

The functions of Bank Negara are issuer of notes and coins and it acts as banker to the central government. Besides, among the major role of the Bank is the prudent conduct of monetary policy, which has seen generally low and stable inflation for decades and thereby, preserving the purchasing power of the ringgit. The Bank is also responsible for bringing about financial system stability and fostering a sound and progressive financial sector. There is now in place a well diversified, comprehensive and resilient financial sector, that is able to meet the increasingly sophisticated needs of consumers and businesses, and which has become a growth driver in the economy.

Function of Bank Negara to Commercial Bank

Members of the public are reminded to use the services offered by commercial banking institutions or the 45 non-bank remittance service providers approved by Bank Negara Malaysia to transfer funds abroad. In Malaysia's more liberalized financial environment, members of the public are free to transfer funds through these authorised entities. The list of commercial and Islamic banks, as well as approved non-bank remittance service providers can be obtained from the BNM website. 

List of Commercial Bank:

By: Jeff Wong 

The Determination of Elasticity

The one of the determination of elasticity would be luxuries and necessity. Necessity is the one that we need in our daily life. For example, Indah Water provide us water that we need, but we still need to pay it no matter what the price level are. Because we need it so that human are very sensitive in necessity.

Luxuries would be defined as people want. Human are more sensitive with luxuries because of their price. And when the price gone down, many people will go and buy. For example Louis Vuitton normal bag would be over $1000. But when the price drop to $700, many people will go and buy because they want and have opportunity to purchase at the low price level.

By= Herman Chan

Concept of Elasticity

There are 3 concept of price of elasticity that a firm can use to decide whether to change the price in the goods and services. Price elasticity of demand measure the responsiveness to price changes. The concept is elastic demand, inelastic demand and unit elastic demand. Elastic demand is the percentage change in quantity demanded more than percentage change in price. Based on the diagram 1, we can see that quantity has decrease when the prices increase. The company may decrease the prices to increase the quantity base on the diagram 1. When the quantity of the product has increases, the company will buy more goods and services from the suppliers so that both sides will get profits.

Diagram 1.

For Example, Digi. Digi provide us an plan that will make both side to earn profit and to increase the quantity of product. Digi give us many type of plan to allow us to postpaid each money to loan the phone that we purchases with internet usage. For example, Current Iphone 5 price would be $2199 and Digi give us low price and unlimited internet usage base on the plan that we purchases. Digi latest plan is to set the Iphone 5 price $80 with 3gb of internet use.

By= Herman Chan

TNB IS A Monopoly?

A monopoly is an industry with a single firm that produces a product for which there are no close substitutes. No other firms are allowed or able to enter the market due to barriers of entry. For example, Tenaga Nasional Berhad (TNB) is the largest Electric utility company in Malaysia and also the largest power company in Southeast Asia with MYR 69.8 billion worth of assets. It is a monopoly company. TNB's core activities are in the generation, transmission and distribution of electricity.

          A government directive is also part of barriers to entry a certain industry, but for monopoly the government has set it is as a consequence of imposition of regulation that makes entry of new firms unattractive or almost impossible. Monopoly is inefficient because price exceeds marginal cost so marginal benefit exceeds marginal cost. On all output levels for which marginal benefit exceeds marginal cost, a dead weight loss is incurred. This causes inefficiency in social welfare in which maximum surplus cannot be achieved.

By = Yap Kuan Wei

PERFECT COMPETITION

Does it applies to the real world?

 

Characteristics of Perfect Competition

Perfect competition is an industry in which consist of a huge numbers of buyers and sellers. Every firm in perfect competition sells identical / homogeneous products which could not be differentiated from one firm to another. Other than that, firms in perfect competition are price takers. Every sellers and buyers are well informed about the prices. Therefore they have no market power in the economy. Furthermore, there are no barriers to entry into the industry, meaning that everyone which decided to venture in this area of business can enter or exit anytime. Due to all the following, established firms have no advantage over the new firms that just enter the market.

As characteristics stated above are just theories, but they are rarely observed in the real world. Why? Because there are merely any fully identical (zero differentiation) products in the market. For example, even a product as simple as vegetables have differentiation between each other, the way they plant the vegetable, is it organic or inorganic and also the quality and freshness.

Furthermore, when a product comes closest to zero differentiation, its industry is usually consolidated into a small number of firms which becomes an oligopoly. For example, oil companies which sells petrol such as shell, Caltex, Petronas, and Petron. As a result, perfect competition may not exist in the real world.

By = Kah Hwang

Oligopoly-Coca cola & Pepsi

Oligopoly is defined as an industry that involve of a few of large firms competing with each other. Both of these brands are legendary brand rivalry. Coca cola and Pepsi are belongs to the oligopoly market so they are selling homogeneous products so they can control over the price but it is mutual interdependence. They need to consider the action of rival because both of these two brands are perfectly close substitutes and the demand curve of other products will affected by each other.

These two brands are using the same pricing strategy that is low-price strategy to maximize the market profits. Both of them will use cut-throat price competition to increase their profits during summer holidays. Furthermore, they have to sign a cartel agreement to set a high barriers to avoid other firm enter this market. Their profits will roughly equal by the other small firms then the economic profits of both of these firms will diminished. 

Advertising wars of Coca cola and Pepsi

Pepsi and coca cola are the world’s top 100 brand with research by the report of “Interbrand” 2012.

Reference

Nataraj Pangal., 2010. Price War Analysis – Coke Pepsi [online] available at: http://www.slideshare.net/natarajpangal/price-war-analysis-coke-pepsi

By = Wong Teck Sheng