Microeconomics | Nurafiqaanisa

MEDIA REVIEW

Recently, there was a water crisis in Selangor. As a result from this crisis, about 722 032 households or 3.6 million people across several parts including Gombak, Petaling Jaya, Klang, Shah Alam, Kuala Selangor, Hulu Selangor and Kuala Lumpur had to face water rationing (Cruez, 2014).

There are several reasons why water crisis occurs. Firstly, no rainfall has led to water crisis. This is because water is a natural resource that is facing scarcity. Therefore, with population of 5.79 million, the demand for water will be high and it is not possible for the residents in Selangor to face a water crisis especially when there is no rainfall for several weeks (Department of Statistics Malaysia, n.d.). In fact, even after the rainfall, the water level at the dams is still at low level (Cruez, 2014). It is also still insufficient to stop the water rationing.

Next, high temperature has made the situation become worse. Uncontrolled development which is also known as urbanization has caused global warming. This happens due to massive developments and clearing of forest nowadays which resulting in less amount of thick forest cover to control the local climate (Piarapakaran, 2014). Therefore, with the hot weather and no rainfall, the water levels at the river and dam have dropped to a critical level.

Moreover, overpopulation in various districts in Selangor is one of the main reasons. For instance, the population in Petaling Jaya is about 600 000 people in 2013 which is double more than the carrying capacity of 250 000 people (Mak, 2014). Carrying capacity is a limit of facilities which also includes water supply that is given to each community to support a limited number of people (Mak, 2014). Therefore, as water is a limited resource, growing population in Selangor has created water shortages. Shortages occur when the quantity demanded is greater than the quantity supplied (Hubbard & O’Brien, 2013). For example, water tariff is RM1.38 per cubic metre for condominium and apartments (Syarikat Bekalan Air Selangor Sdn Bhd, n.d.). Referring to Figure 1, when the water price is RM1.38, the quantity demanded will be at point A and quantity supplied will be at point B. Hence, shortages take place.

Figure 1

In addition, due to shortages, customers are willing to pay higher price to get what they want. Thus, firms will increase their prices to reduce shortages. However, in this case, it has been predicted that water crisis will occur in 2014 if water resources are not managed properly (The Malaysian Times, 2014). However, Selangor government believes that it will be enough water supply to meet the demand of Selangor and Kuala Lumpur residents up to 2019. Thus, the state government do not agree to increase water tariff (The Malaysian Times, 2014). As a result, water crisis occurs in 2014 due to huge shortages. Thus, water rationing is required to avoid the dangerously low water level at the dam to continuously drop.

Furthermore, water crisis in Selangor brings some effects to Syarikat Bekalan Air Selangor (SYABAS) as a supplier and also to all residents of Selangor as a consumer. SYABAS is a monopoly market structure since it is the only firm that supplies water to all residents in Selangor. Due to hot weather and no rainfall, SYABAS has to decrease their water supply. That is why water rationing has occurred. As referred to Figure 2, decrease in supply will result in increase in price and decrease in quantity. Thus, due to the latest water crisis, state government will determine the need for a water tariff revision. There is high possibility that water tariff will be increased following with the construction of the Langat 2 water treatment plant (LRAL2) and its distribution system (NewStraitsTimes, 2014).

Figure 2

On top of that, black market happens due to the shortages of water resources. A black market is a market where buying and selling of products takes place at a price that violates government price regulations (Hubbard & O’Brien, 2013). In this case, SYABAS has sold water to third parties. The third parties who are nine contractors have been taking advantage on the current water rationing exercise by re-selling the water at a higher price (theSundaily, 2014). Then, demand for water that is perceived to be necessity is relatively price inelastic. Hence, consumers are less sensitive to the increase in price and they are willing to pay at a high price in order to get a water supply. Thus, referring to Figure 3, the contractors still manage to get high revenue although there is dropped in quantity and increased in price.

Figure 3

To conclude, there are several reasons why water crisis occurs in Selangor which are no rainfall, high temperature and overpopulation. As a result, water tariff may increase due to decrease in water supply and black market also takes place when there is water shortage.

REFLECTIVE JOURNAL

Under Fresh Mart project, students are expected to manage a small business enterprise that sells a variety of fruits and vegetables produced by local farmers. As a student, there are several learning experiences of applying microeconomic concepts that I have achieved in undertaking this fresh mart project.

At first, my team and I are having hard time in deciding on what vegetables to sell. There are many ideas and opinions that have been given. Finally, with the aid of demand concept, my team and I manage to select several vegetables to sell which are carrots, cherry tomatoes, cucumbers and red chillies. Those vegetables are chosen because we believe that those vegetables are highly demanded especially among youngsters nowadays.

In addition, customers taste and preference which is one of determinant of demand is also one of factors that we consider when selecting what vegetables to sell. Since cherry tomatoes can be carried around easily and people can just eat them right away, we assume that it will become the best seller among the chosen vegetables. Therefore, we have ordered them more than other vegetables to increase profit.

Moreover, my team and I are also having problems in setting the prices. Thus, we have applied price elasticity of demand concept in solving this problem. We have charged a higher price to more inelastic demanded products to acquire a maximum profit. For instance, we set a higher price to cherry tomatoes as cherry tomatoes were more inelastic in demand than other vegetables.

On top of that, I have acquired and developed several important skills and capabilities as a result of undertaking this module. Discipline specific knowledge is one of the skills that I have developed as now I am able to put theories into practice. For instance, I have applied the concept of demand, supply and price elasticity of demand in solving issues that arise during my Fresh Mart project. My team and I have tried our best in reducing the costs and wastages so that we can get the higher profit. We also set the price according to the elasticity of the particular goods. This shows that I am not just learning microeconomics in class, but also make it more practical by practising it in the real life.

Besides, this module gives me a lifelong learning. This is because I need to learn independently, locate, extract, synthesise and utilise information effectively and be intellectually engaged. For example, in this module, I have to make comparison on various microeconomic tools of analysis and analytical frameworks and their use within the real business environment and current events by searching independently on web resources and newspaper. From there, I learn how to locate, extract, synthesise and utilise information effectively.

Furthermore, this module gives me the opportunity to think critically and creatively. Thus, I am able to enhance my thinking and problem solving skills. As an example, some of the tutorial questions that have been given to students are about real life economics arguments. Hence, it will require me to think critically in solving those arguments. Usually, I will analyse the problems, gather knowledge of the various microeconomic concepts and adopt graphs and tables in building and supporting arguments to arrive at effective solutions.

Next, the use of X-Space collaborative classroom has given a lot of benefits upon my learning experience. Learning in X-Space collaborative classroom gives me chances to build a good teamwork with my classmates. Then, it does help me in enhancing my citizenship and global perspectives and interpersonal skills. This is because when studying or doing works in a group, I will be more aware of and form opinions from diverse perspectives. Working in a group will also drive in leadership skills in me. On top of that, I have also enhanced my digital literacy skills with the help of Information and Communications Technology (ICT) and related technologies that have been prepared and used effectively in that classroom.

In conclusion, I have developed new skills and enhanced my existing skills as a result of undertaking this module. These skills are very important for me in the future especially when I am in working life. I will need those skills to maintain a good relationship with my colleagues and more importantly, to be the best employee. Plus, I will also have to practice these skills continuously in my university life in order to be the best student and to prepare myself to be future best employee.