Microeconomics Individual Assignment

     The consumption of electricity by an average household in Malaysia is increasing as days gone by. As we know, the high demanding rate of electricity in Malaysia which exceeded the supply has caused several obligation in obtain electricity, which place a scenario of shortage. The high demand of electricity is mainly due to increasing population; changes in the price of complementary goods and also consumption of electricity by certain electronic appliances. However, the supplying rate by the electricity board could not meet the demand as to high resources price and lack of skills personal. 

     The willingness and the capability of purchasing in a certain quantity at a given price is what we call demand. For example, we may be willing to consume an amount of electricity; however, holding the form of willingness will not be effective, as we should hold the capability to consume the electricity at the given selling price.

     When price if not being the factor; there are still many determinants that affect the demand. First of all, we could view a linear increment in the population from the Malaysia Population Statistic, which tends to be the factor of high demand for electricity (Sloman, Wride and Garratt, 2012).

      

  

However, the prediction of population is expected to increase due to Malaysia’s aim of being a developed country in Year 2020 (Musa, 2011). Result to the development as shown in Figure 1.1, the population will then increase the demand of electricity from Q₀ to Q₁, as to fulfill the consumption by every individual, which then cause a right shifting effect towards the demand curve from D₀ to D₁.

The next affecting factor would be the changes in the price of complementary goods. The complementary goods towards the demand of electricity would be goods such as television, air conditioner, refrigerator and many others. As electronic appliances would play a demanding role in the consumption of electricity. A recent news showing a declining price of LED television which leads to popularity of 37% in the market, which could be the affecting factor in the changes of complementary good’s prices that leads to the demand of electricity (The Star, 2011). As the result of declining price of such good, it will then increase the demand for electricity from Q₀ to Q₁, that leads to a rightwards shift in the demand curve from D₀ to D₁ as shown in Figure 1.1.

Besides that, the consumption of electricity by a certain electronic appliances would be one factor that affects the demand of electricity (Tenaga Nasional Berhad, 2013a). In every electronic appliance these days, they are installed with functions that permit the minimal usage of electricity. Such appliance would be the air conditioner with energy saving mode. However, not all the appliances come with the function due to the age of the appliances itself or the low advancement of technology by the firm. Referring to Figure 1.1, when a certain electronic appliances that consume high amount of electricity, it will then lead to an increase in the demand of electricity from Q₀ to Q₁, which creates a rightward shift of the demand curve from D₀ to D_1.

     The producer’s willingness and the capability to sell a certain quantity of goods at a given price bring the meaning of supply  (Sloman, Wride and Garratt, 2012). Supplier’s main purpose is to reach the aim of gaining profit from the sales of goods where the willingness and capability of the suppliers, totally depends on the future profit they are gaining from the production of the goods.

     As to the low supply rate of electricity, if the price does not determine the quantity supplied, there are factors that cause the change in supply. First of all, it would be the price of the resources. In Malaysia, the main resources used to produce electricity would be coal, and these resources are obtain 60% from Australia, 30% from Indonesia, 5% from China and another 5% from South Africa, which clearly show that Malaysia obtain 100% of the coal from an external source (Choong, 2012). Hence, a higher price in the resources will then reduce the amount produced from Q₀ to Q₁ and leading to a leftward shift in the supply curve from S₀ to S₁ as shown in Figure 1.2.

     The next factor that leads to a low supply rate in electricity is that Malaysia has a lack in the number of skilled personal (Tan, 2010). The technology advancement in Malaysia’s electricity board has pay lots of attention on it. However, this technology advancement is not being efficiently used as the number of skilled personal in the industry is lacking. Holding on to a low rate of skilled personal will then lead to a decrease in supply of electricity from Q₀ to Q₁, which then lead to leftward shifting in the supply curve from D₀ to D₁ referring to Figure 1.2.

     Relating the above issue discussed with the news article, we could clearly view the problem where the demand of electricity has exceeded the supply rate, which then lead to a shortage in the market (Muthiah, 2012). However, the shortage problem should be solve especially when the goods are a form needs and urgency, as this will result in the dissatisfied consumer and users.

     

     One of the ways in solving the scenario of shortage in electricity is that, a rise in the price of electricity per kilowatt-hour should be implemented by the electricity board (McConnel et al, 2012). Under the economics explanation, when price of electricity increase from P₀ to P₁, it will then lead to a lower consumption of it which creates an upward movement along the demand from Q₁ to Q₂ and supply curve from Q₀ to Q_2, based on Figure 1.3. It is because a higher price will cause the consumer to consume electricity in conservative way and producer expecting a rise in selling price will then increase the supply of the goods which then create a meet up at the equilibrium point A where no shortage or surplus is occurring.

     In another point of view, the increasing price of electricity could be a bad effect towards the consumer. However, being a necessity is totally opposite as they create an inelastic demand where the responsiveness upon a change in price would not be affected much (McConnel et al, 2012).  As for electricity, when there is a rise in price, consumer will tend to be conservative but not avoiding it at a full blow as electricity is totally important in the continuation of their daily basis. Hence, results a small change in the quantity of electricity from Q₀ to Q₁, when price changes from P₀ to P₁, as referred to Figure 1.4.

The next solution to the shortage is that, consideration should be given in order to replace the resources with their alternatives such as nuclear energy (Muthiah, 2012). It is because in Malaysia, the supply of coal is 100% obtain from external countries and by choosing other alternatives, TNB would not base fully on coal to continue production. Hence, by replacing the resources, the production of electricity will then increase from Q₀ to Q₁, leading to a rightward shift in the supply curve from S₀ to S₁ and also price falls from P₀ to P_1, which then cause a movement downward along the demand curve as referred to Figure 1.5. With the shifting of supply curve, it creates a new meet up point A where quantity supplied is sufficient. 

Opponent view of nuclear energy has initially created the dissatisfaction in the heart of citizen, where they fully determine their safety upon the radioactive ray in the nuclear emission on the firm such as Lynas. However, after detail plans and rule being amended, the citizen agrees on the matter where nuclear waste is being exported out of the country for their safety purposes (The Star, 2012)

     Another solution that should be taken consideration is that, employee should be given proper and detail training on their job prospect especially in the maintenance and operation of technological appliances. From example, TNB provides a premier technical training called ILSAS of long and short term under the electronic field with the aim of being the centre of excellence (Tenaga Nasional Berhad, 2013b). With such training and development program, it will then boost up the firm production efficiency as the employee has the knowledge related to their task. Referring to Figure 1.5, when employee has the intelligence on their task, the supply curve will then shift rightwards from S₀ to S₁ and a price fall from P₀ to P₁, which then cause a movement downward along the demand curve. Hence, the shift in supply curve then creates a new point A where supply is meeting the requirement.

     As a conclusion, electricity is one of the necessities in our daily life, as the generation these days needs to generate every single appliance with the help of electricity. Wastage of single electricity is a certain prohibition, as every single voltage of electricity supply enables us to perform our activities. Hence, with the intervention of non-governmental organization (NGO) into the effective campaign which is able to create awareness among electricity user such as Earth Hour, it will cause a reduction in electricity consumption. Statistics had shown, that within the 1 hour of the event, the average amount of 100 – 200 MW of electricity being conserved (Lai, 2013). Therefore, we as a consumer should appreciate electricity, as an avoiding way to the scenario where supply does not meet the demanded amount.

References

Choong, M.Y. (2012) Coal and gas it is, for now. The Star [online]. 14 August. Available from: http://thestar.com.my/lifestyle/story.asp?file=/2012/8/14/lifefocus/10800430&sec=lifefocus [Accessed 6 June 2013].

Lai, I. (2013) Do your bit for Earth Hour. The Star [online] Available from: http://thestar.com.my/news/story.asp?file=/2013/3/23/nation/12876389&sec=nation [Accessed 7 June 2013].

McConnell, C.R., Brue, S.L., Flynn, S.M. and Grant, R. (2012) Economics. United States of America: McGraw-Hill Inc.

Musa, Z. (2011) Higher electricity consumption in southern Johor. The Star [online]. 4 April. Available from: http://biz.thestar.com.my/news/story.asp?file=/2011/4/4/business/8365282&sec=business [Accessed 5 June 2013].

Muthiah, W. (2012) Demand for electricity has exceeded supply: TNB chief. [online] Available from: http://thestar.com.my/news/story.asp?file=/2012/2/16/nation/20120216103037&sec=nation [Accessed 5 June 2013].

Sloman, J., Wride, A. and Garratt, D. (2012) Economics. 8th ed. England: Pearson Education Limited.

Tan, D. (2010) Skilled labour shortage very serious, says minister. The Star [online] Available from: http://biz.thestar.com.my/news/story.asp?file=/2010/4/28/business/6144363 [Accessed 7 June 2013].

Tenaga Nasional Berhad (2013a) Residential: Energy Savings at Home. Available from: http://www.tnb.com.my/residential/energy-savings-at-home/usage-cost-of-electrical-appliances-at-home.html [Accessed 5 June 2013].

Tenaga Nasional Berhad (2013b) About TNB: Training and Development. Available from: http://www.tnb.com.my/about-tnb/our-business/training-and-development.html [Accessed 7 June 2013].

The Star (2012) Declining prices make LED TV popular taking up 37% of market. [online] 27 June. Available from: http://biz.thestar.com.my/news/story.asp?file=/2012/6/27/business/11554320&sec=business [Accessed 5 June 2013].

The Star (2012) Lynas gets temporary operating license. [online] Available from: http://thestar.com.my/news/story.asp?sec=nation&file=/2012/9/5/nation/20120905162349 [Accessed 6 June 2013].

Trading Economics (2013) Malaysia Population.  Available from: http://www.tradingeconomics.com/malaysia/population [Accessed 7 June 2013].