Economics and Government

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1.0 Introduction:

Economy affects the lives of individual and society as a whole. Economic exists to fulfill the unlimited human need in limited resources. Economic include what should be produced, how it should be produced and who should produce it. Basically there are 4 type of economy which categorized depended on the deference characteristics possessed. The four type of economic system are traditional system, free-market/Price system, Centrally-planned system and mixed system. Traditional system is the oldest and most influential system. This system exists since early civilizations. This system provides less demand on the resources in economics because goods are usually produced only if they will be consumed. Hence, shortage or surplus of good is unlikely to be happening. Free-market or Price system is a system where the decisions regarding investment, production and distribution are based on supply and demand while pricing of the goods and services is based on market needs (free pricing system).Centrally-planned system is an economic system which all economic production and investment and social activities are controlled and regulated by a particular body, usually by a government agency. Mixed economic system is a mixture of all previous systems which consist of both state and private sector directing the economy. However, the level of mixture is depending on the level of government interference/intervention in the economic system. Malaysia is having a free market economic system that had inherited from British rules. Due to the weakness in the free market economic system, Malaysia government have directly or indirectly involved in economic activities. The government intervention in the free market economic system has turned it into a mixed economic system.

2.0 Evaluation on Malaysia’s economic system

2.0.1 The strength of Malaysia using mix economic system
Government intervenes in goods and services under the policies of controlled items to maintain at a stable pricing. Thought this intervention, the public are able to enjoy good and services in lower and stable price. Petrol for instance, most petrol stations in Malaysia provide both RON97 and RON95. The price of RON97 was effect by global market pricing which will be revising accordingly. RON95 in other hand was subsidized by government. RON97 selling at RM2.70 per liter whiles the subsidized RON95 selling at RM1.90 per liter as on 16th of June 2011. Consumers will choose lower grade petrol RON95 which is perfect substitute to RON97 as their able to enjoy maximum satisfaction regarding theirs real income. Example of some of the controlled items under “Akta Kawalan Harga 1946 since 13th of September 2006. BilItemUnitPeninsular MalaysiaSabah & Sarawak

1Refined white sugar (kasar)1KGRM2.30RM2.40
2Refined white sugar (halus)1KGRM2.40Rm2.50
3Petrol RON 951 LiterRM1.90RM1.90
4Diesel1 LiterRM1.80RM1.80
5Liquid Petroleum Gas (LPG)1 KgRM1.90RM1.90
6Wheat flour1 KgRM1.35RM1.45
* Updated on: May 19, 2011

Government interventions are able to reduce distribution gap. The Ninth Malaysia Plan has made a good progress in eradicating poverty and reducing income and wealth disparity. The Ninth Malaysia Plan also improves the strengthening of the Bumiputera Commercial and Industrial Community (BCIC). For example, Bumiputera ownership of share capital of limited companies increase by 2.5% from 21.9% compare to 19.4% in 2006. Bumiputera ownership in commercial buildings and premises also show significant increased from 11.7% in 2005 to 14.0% in 2008. Government establishes Ekuiti Nasional Berhad (EKUINAS) in 2009 to further enhance Bumiputera participation in the economy.

Government intervention on focus and accelerate in economic growth. Government attracts and retain on both capital and talent to drive internal competitiveness as well as strengthen international competitive ability. Government empowers MPC to identify key...
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