Advantages ON THE Mixed Market Economy In Malaysia - Essay

The financial systems is one of the branch of economics, the economics is studies about the institutions and the methods by the societies to look for the ownership, direction and allocation of the economic resources. Economic system is the mechanism that handles the distribution, production and the intake of services and goods in a specific society. There are three basic and general financial systems, which can be free market economy, centrally planned economy and mixed economy. The mixed economy is when there exists some level of the federal government policies and central planning looked after can allow the market to provide for the needs of the buyer. Malaysia is a mixed economy, our government allows our market can do our own thing, but there likewise have a few of the policies in place to control over the certain thing. There is not each and every product or industry need government to regulate, but some of the merchandise should be under government control. For an example of one product that under Malaysia government control is gun. In Malaysia you can have a gun with no license. In Malaysia, the federal government has tight control over the gun. There are plenty of reason Malaysia government have this control, the reason are for the national security, our government wants to prevent shootings, robbery and gun violence minimize fear in our country.

There are extensive benefit of mixed economy in several characteristics. About the resource allocation in mixed economic, the government will decides on the resource allocation about the commodities which can be scarce. About the wealth ownership in mixed economy, there is a mixture of the federal government and the private ownership. For a good example, some of the land are belongs to government and some of the land are belongs to private. About the perfect solution is of economical problems in mixed economic, the federal government will intervene about it, especially to implement development policies. About the economic efficiency in mixed economy, the economy efficiency will depends on the government and private sector efficiency. Next, about consumer freedom in mixed economy, while the consumers involve some say, their voices are not strong. For an example, if the petrol rise 50 sen in a single liter, the folks will complain about the price of petro, the government maybe will deal with this case or maybe not. About the distribution of income in mixed economy, the incomes of personnel in some of the sectors are managed by our government. The example are the people who are work in the government place. After that, about the provision of services in mixed economy, some of the assistance are privatized and the government provides for basic services. Compare to free market economy and centrally planned economy, the benefits of mixed economy are numerous. The advantages will be the people can get into business themselves and decide what product they can sell, produce plus they can also set their own price. The businessman in mixed economic need to pay taxes, however they can reap the benefits associated with the tax through the roads, social programs and other government services. The mixed economy are much more stable if compare to free market economy, and the federal government regulations can also prevent the exorbitant investment and inflation. Beside our country Malaysia, the financial systems in India, Thailand, Indonesia, and Singapore are also belongs to mixed economy.

What is the price mechanism? The price mechanism is the most basic feature of the economy for allots all the resources to other uses. It is something of the interdependence between your supply of goods or service and its own price. It sends up the price when the demand has ended supply and it decrease the price when the supply over demand. Price mechanism also restricts the supply when the suppliers are leave the market because the reduced prevailing price, it also increase it when many suppliers come to the marketplace. Price are determine by surpluses and shortage. If the price of product is higher than profit, the suppliers will supply more due to producer profit motive. The purchase price mechanism are plays the three important function, they are really signaling function, rationing function and transmission of preferences. First, the signaling function is use the change popular to show that where in fact the resources are needed. For an example, if the goods are scarce, the price tag on it'll increase. This increase in price can provide the supplier to create more in the product. Prices rise and fall is reflect the surplus or scarcities.

Now, the I phone 4 is the best-selling upon this year, therefore the demand of the I phone 4 is high. The producers confirm will produce more and increase the price of I phone 4 because they can earn higher profits and revenues from selling the I phone 4 at an increased price per unit. Therefore the diagram shows an outward shift of the demand in the supply curve. Next, the diagram near the top of right hand side is the second example, the demand of the I phone 3 are decrease because the apple launch the I phone 4. The diagram show that decrease the price of I phone may cause the supply increase. Conversely, if the price tag on I phone 3 increase, that will induce the suppliers decrease their supply. Next, the next function that the price mechanism play is rationing function, this function is when there is a very high demand of one goods, the price of it'll increase. Finally, the merchandise maybe can be only the high income people ability to pay the product. This function can cause the supply and demand to attain equilibrium. The 3rd function is the transmission of preferences, this refers to the individuals are able to notice the producer changes in needs and wants, so this can help the marketplace provides correct amount of the right product. After that, In Malaysia, the purchase price mechanism is permitted to operate but sometimes the purchase price mechanism fails or works against public interest. In economic, the market failure occur when the use of goods and services or the production by the marketplace are not efficient. We say that whenever markets cannot provide us the best outcome in conditions of efficiency and fairness, that is market failure. There are a lot of reasons that may cause the market failure, such as negative externalities, positive externalities, imperfect information, market dominance by monopolies, factor immobility and equity issues. First reason is an agent on the market can gain market power and allow these to block other mutually benefic gain from the trade. Inside the monopoly, equilibrium of the marketplace won't to be Pareto optimal. Second reason is the actions of a realtor can be externalities. For a good example, whenever a firm producing the tires, it will use the capital, labour and other inputs, and this will cause the reflected of the price of the tires on the market. The firm maybe can make polluting of the environment when they produce the tires. That's not force the firm to cover use of the resource, all the cost will be borne by the society. So, the marketplace price of the tires will decrease plus they cannot get the entire opportunity cost when sell to society. This will also cause the marketplace equilibrium in the tires will never be optimal. The third reason is some of the markets will fail because of the nature of the exchange or the type of certain goods. While the markets contain the important transaction costs, information asymmetry or agency problem, they can cause inefficiency, and market failure.

Next, the government can overcome the marketplace failures by using the three popular ways. The three tools that the federal government uses are internalization or merger, tax and subsidy plans and legal restrictions. The internalization or merger is means that the government merges two companies together to save their ailing or the management problems. It also can help the firm to increase their working rate, reduce the expense of product and develop a better plant structure. For a good example, there is a firm that produces lettuce picking machines, the machines cause this inflatable water pollution because the firm don want to purchase the waste treatment facilities because it is expensive plus they dumps the wastes into the river. They feel that is only an inexpensive and the machines can offered for sale at low price. The more lettuce picking machines are built, will cause more water pollution. The techniques can overcome this problem is merge the lettuce producing firm to the firm that manufactures picking machines. The diagram below is show that both firm before merge, there are many disadvantage that cause by each other. After merge, the produce rates of one another are increase to allow them to earn more profit.

The next techniques government use to overcome the market failure is tax and subsidy plan. Tax can increase the private cost of production or consumption and it also can decrease the demand or the output of the products which already are shortage. The sources of earning that are need to pay the tax are pensions, annuities or other periodic payments, royalties, rents or premiums, dividends, interest or discounts, remuneration and profits from a jobs, profits from the trade, the business enterprise and profession. A couple of five type of the tax that use in Malaysia, these are company tax, personal tax, sales tax and service tax. The business tax refers to tax that the business need to pay, however, many of the company you don't need to pay the tax because there are resident company or the sources outside our country, such as insurance business, air or sea transport enterprises. About the non-public income tax, the folks in Malaysia are prone to pay this tax and the tax rate will depends upon individual determine by the duration of stay static in Malaysia. The next is sales tax, this tax is add on the import and manufacturing levels. The manufactures need to be certified under Sales Tax Act 1972. But the license will be exempt if the twelve-monthly sales of the firm cannot more than RM 100000. Last is the service tax, this tax we always can easily see at the restaurant or hotels because this tax in increase the certain goods and service, the goods are food or drink.

The diagram at the left hand side is show an indirect taxes, an indirect tax will rise the price tag on the product and it cause a contraction of demand. The federal government intervene on the market because they would like to change the purchase price signal. The next diagram at right hand side is show that the federal government subsidies. Government subsidy to the consumers to cover some of the expenses of employing nannies or purchasing the child care was created to reduce the relative cost of this and therefore improve the demand.

Next the one other way that to overcome the market failure is legal restrictions. A number of the external effect are incredibly far from the marketplace that no market oriented institution or the rune can be use to improve them. A petrol station which build in the heart of housing area may be convenient for the nearby residents, but it will cause the value of adjacent of residential properties become lower. The cities use the zoning laws to safeguard their house values and against the undesireable effects of business being found in the housing area. The graphically in below is an example that show about the condition and the best way to overcome.

There have another example, this diagram show that the gas station are noisy and odorous, beside that they also cause the traffic problems at certain hours every day. These effect are no taxing or to compensate the householder for their lose. So the householder request for help government. From then on, the zoning ordinances are use to prevent the people from opening filling stations in the housing area. The federal government use the law or the legal restriction to lessen the property values and hostile voters.


Our country, Malaysia is mixed economy. There are various advantage i already describe about mixed economy if compare to free market and centrally planned economy. After that, I have already explain the purchase price mechanism and the three main function of it when use in economy. The price mechanism is allowed to operate in Malaysia. Next, I also analyze about how the federal government interfere and overcome the marketplace failure. If the country no have market failure or any government failure, the country will become stronger.

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