Market Equilibrium(Afiq)

MARKET EQUILIBRIUM FOR PRICING OF SUGAR IN MALAYSIA

The price of sugar is one of the controlled items by the government of Malaysia. It has been gone up four times since the January, 2010 and it has bringing the retail price per kilograms to RM 2.30 now.  The increase had been necessitated by factors beyond the government’s control, such as climate change, natural disasters in producing countries and global market price. The market equilibrium is the price where quantity demanded equals with the quantity supplied. The reasons I am using sugar as the subject because the raw of sugar has doubled in price over the past 18 months. The consumer demand for sugar has increased day by day while in the same time, the supply of sugar has decreased.

 For example, a seller offer 10,000 packs of sugar at the price RM2.30 for each pack, but buyers will purchase only 4000. The RM2.30 encourages sellers to offer lots of sugar but discourages many consumers from buying it. If the seller produced all the 10,000 packs, they would find themselves with 6000 unsold pack of sugar. The large surplus would prompt competing sellers by lowering the price to encourage buyers to take the surplus off their hands. As the price falls, the incentive to produce sugar would decline and the incentive for consumer to buy sugar would increase.

In conclusion, the market interacts to bring about the equilibrium price, clearing the market of excess demand or supply. In this way, it is said that the market mechanism achieves consistency between the plans and outcomes for consumers and producers without explicit coordination.