Comments on: Letting markets work: the Malaysia fuel subsidy goes bye bye http://welkerswikinomics.com/blog/2008/06/09/letting-markets-work-the-malaysia-fuel-subsidy-goes-bye-bye/ for students and teachers of AP and IB Economics Sat, 22 Nov 2008 12:23:58 +0000 http://wordpress.org/?v=2.6.3 By: moritzreithmayr http://welkerswikinomics.com/blog/2008/06/09/letting-markets-work-the-malaysia-fuel-subsidy-goes-bye-bye/#comment-6326 moritzreithmayr Wed, 22 Oct 2008 19:58:54 +0000 http://welkerswikinomics.com/blog/2008/06/09/letting-markets-work-the-malaysia-fuel-subsidy-goes-bye-bye/#comment-6326 A subsidy creates a disequilibrium in the petrol market in Malaysia because it increases supply and the supply curve shifts outwards, away from the equilibrium. Therefore, the quality demanded increase because the price of gas decreases. Without the subsidy, the market would move to the equilibrium. There are several things that the Malaysian people would do after such a high increase in gas prices besides demonstrating of course. First of all, it will cut down driving. Secondly, the Malaysians will start using Public transportation. Another thing, they may do is going to a neighbouring country, such as Singapur, and buy enough fuel for the next few months at the market price in Singapur. By making fuel prices rise and foring consumers to pay more in the short-run, the market would react by a decrease in quantity demanded. Hence, the equilibrium would move down the demand curve in the long-run causing prices to drop. A subsidy creates a disequilibrium in the petrol market in Malaysia because it increases supply and the supply curve shifts outwards, away from the equilibrium. Therefore, the quality demanded increase because the price of gas decreases. Without the subsidy, the market would move to the equilibrium.
There are several things that the Malaysian people would do after such a high increase in gas prices besides demonstrating of course. First of all, it will cut down driving. Secondly, the Malaysians will start using Public transportation. Another thing, they may do is going to a neighbouring country, such as Singapur, and buy enough fuel for the next few months at the market price in Singapur.
By making fuel prices rise and foring consumers to pay more in the short-run, the market would react by a decrease in quantity demanded. Hence, the equilibrium would move down the demand curve in the long-run causing prices to drop.

]]> By: ck http://welkerswikinomics.com/blog/2008/06/09/letting-markets-work-the-malaysia-fuel-subsidy-goes-bye-bye/#comment-5164 ck Tue, 10 Jun 2008 06:59:36 +0000 http://welkerswikinomics.com/blog/2008/06/09/letting-markets-work-the-malaysia-fuel-subsidy-goes-bye-bye/#comment-5164 Petrol price had gone up. Everyone knows it. So many desperate fellows actually drove their cars bumper to bumper queuing in lines just to get their tanks filled last night hoping to save some money before the super price hike. I am no MBA or economist, so I am in no position to fully understand the fuel subsidy thing and their effect on the economy and blah blah blah. But as a normal citizen who has an almost properly functioning brain, I can tell you that the currently planned method of cash rebate is a piece of shit that could only come from someone with shits in their heads. Reasoning: 1) How many cars are over 2000cc?? Few or may be very few only. Meaning that many (rich or poor), will still benefit from the cash rebate irrespective of their gas using habit. This is not what we want. We want the poor to receive more. 2) Let say I am a businessman who runs a car rental service and I own 50 cars for rental. I rent the car to customers and customers fill and pay for the petrol themselves, so essentially I will receive $31,250.00 ($625.00 x 50) annual cash rebate for doing nothing, extra profit from the stupid policy maker and government. 3) Let say I am a filthy rich man and I own 5 luxury cars but all are below 2000cc, or may be I am just a rich man who likes to own nice cars, then I will be entitled $3,125.00 ($625.00 x 5) annual cash rebate despite being filthy rich with overspending lifestyle while my fellow poor neighbor who owns a Honda 70cc kap-cai only receive $150 annual cash rebate despite being poor and living a thrifty lifestyle!!! VERY STUPID GOVERNMENT!!! 4) Let say I am a poor man who don't own any cars/motorbike and I rely on public transportation to go to/from work, then I will not get anything sumore I am likely to pay more for transportation fares due to the diesel hike, despite me being very poor not even capable of owning a motorbike, being nice for using public transportation thus relieving road congestion, being environmental friendly by not burning fossil fuels, but in return I get punished!!!! DAMN STUPID GOVERNMENT!!!!! 5) And lastly can the uncle-uncle and auntie-auntie at the POS offices handle the sudden surge in demand for counter services as a result of the cash rebate?? Judging from the services and experiences I had with those uncles and aunties, I don't think so! Anyway, I am not all critics and no help. My suggestion is why not implement the rebate in the form of income tax relief/rebate base on income level? Petrol price had gone up. Everyone knows it. So many desperate fellows actually drove their cars bumper to bumper queuing in lines just to get their tanks filled last night hoping to save some money before the super price hike. I am no MBA or economist, so I am in no position to fully understand the fuel subsidy thing and their effect on the economy and blah blah blah. But as a normal citizen who has an almost properly functioning brain, I can tell you that the currently planned method of cash rebate is a piece of shit that could only come from someone with shits in their heads.

Reasoning:

1) How many cars are over 2000cc?? Few or may be very few only. Meaning that many (rich or poor), will still benefit from the cash rebate irrespective of their gas using habit. This is not what we want. We want the poor to receive more.

2) Let say I am a businessman who runs a car rental service and I own 50 cars for rental. I rent the car to customers and customers fill and pay for the petrol themselves, so essentially I will receive $31,250.00 ($625.00 x 50) annual cash rebate for doing nothing, extra profit from the stupid policy maker and government.

3) Let say I am a filthy rich man and I own 5 luxury cars but all are below 2000cc, or may be I am just a rich man who likes to own nice cars, then I will be entitled $3,125.00 ($625.00 x 5) annual cash rebate despite being filthy rich with overspending lifestyle while my fellow poor neighbor who owns a Honda 70cc kap-cai only receive $150 annual cash rebate despite being poor and living a thrifty lifestyle!!! VERY STUPID GOVERNMENT!!!

4) Let say I am a poor man who don’t own any cars/motorbike and I rely on public transportation to go to/from work, then I will not get anything sumore I am likely to pay more for transportation fares due to the diesel hike, despite me being very poor not even capable of owning a motorbike, being nice for using public transportation thus relieving road congestion, being environmental friendly by not burning fossil fuels, but in return I get punished!!!! DAMN STUPID GOVERNMENT!!!!!

5) And lastly can the uncle-uncle and auntie-auntie at the POS offices handle the sudden surge in demand for counter services as a result of the cash rebate?? Judging from the services and experiences I had with those uncles and aunties, I don’t think so!

Anyway, I am not all critics and no help. My suggestion is why not implement the rebate in the form of income tax relief/rebate base on income level?

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