Malaysia is a democratic country with excellent economic system. We are one the leading country in economic terms and being an example for the economy system we are using. Economic system can be defined as a system which indeed organize and structures the resources that are available in every country or state. Economic systems are economics that studies the methods and institution by which societies determine the ownerships, direction, and allocation of economic resource. Economics is important for every organization for them to structure and to plan any budget. There is a lot type of economics and different country use different economy systems but as we all know in Malaysia we use mixed economy. In this mixed economy, the degree of government intervention and the public are at balance. It is based on the free enterprise principle there is some other form of direct intervention and control by the government. Other than that, It is also can be defined as decisions are made by the government and partly through the market. In this mixed economy system, most economic decisions are made by the market and several economic decisions are in hands of the government which are mostly due to scarcity for an example petroleum prices, oil price, sugar price and others. This is as such as the market on these scarce goods and services are very much protected and government intervention begins as they are in responsibility to overcome scarcity. The economy in Malaysia is depending on the government for an example for this 2018 the budget is depending on the new government and most of things are deducted and changes. It is based on the opportunity and so on. Despite, government of Malaysia also intervene in new market establishment where the government endorses a Barrier of Entry for the new market ownerships which is very much in need to be required to be able to establish any business or market in Malaysia. Barriers of Entry in Malaysia includes of imposing taxes on goods, the control of price, prohibiting from selling certain goods or services and many more. These Restrictions by the government are to ensure to retain a balanced and well growing economy. The strong economic performance has helped improve the quality of life for Malaysians and supported advances in education, health, infrastructure, housing and public amenities and others. There are some characteristic of mixed economy such as resource distribution, government will decides on the resource distribution of scare merchandise, a mixture of government and private ownership of the wealth ownership. Government plays major role in economic growth as well as distribution of wealth. For example, our government collects tax and provides subsidies at the same time for the publics. Next, for the solution of economic problem, government will intervene especially to carry out development policies. The economy efficiency depends on both private sector efficiency of the economy efficiency because both of this will contribute to the economy of Malaysia. Other than that, other things that will considered is allocation of income for government workers and also towards the private sector. Actually, when we talk about economy there is a lot of things that need to be talk such as supply, demand, and shortage, surplus and so on. Malaysia have been through a lot of crisis economy and the way to eliminate the crisis economy is by implement a New Economic Policy to prevent poverty in Malaysia.
In term of utility maximization in Malaysia’s economy which is Economics concept that, when making a purchase decision, a consumer attempts to get the greatest value possible from expenditure of least amount of money. His or her objective is to maximize the total value derived from the available money. In Malaysia, according to the economics view we have to minimize all the expenditure for an example this 2018 we can see that all the expenditure have been cut off due to overflow of money. Every allowance have been take back and all the employer trying to reduce all the allowance given. Other than that, in Malaysia we can see a lot of things have been changing moreover to the things that money involve on it such as oil and gas. The subsidy have been taking back by the old government and we can see that every Wednesday the price of oil will change. This is because they like to look at the world price of oil. Another stumbling block in Malaysian energy reform has been a dependency on the world price of imported products and all related direct and indirect costs, such as costs of refining, transportation, storing, import duties and taxes. Malaysia’s petroleum pricing policy does not take into account the foregone opportunity cost of production share that is sold entirely in the domestic market under the subsidized price. Thus, the domestic prices of petroleum products were kept almost constant for a specified period, but demand for some of these products have fluctuated at different points of time.
Instead of oil, actually there is a lot of things that have been through maximization, such as natural resources. There will be an optimum utilization of national resources, In a mixed economy, the resources are utilized efficiently as both government and private enterprises are utilizing them. The combined efforts lead to rapid economic development. The economic resources of the economy are used efficiently. Wastages of resources are minimized and most importantly, people are given more power. The public have more to say when it comes to the quality and the prices of products and services. Every natural resources have been using wisely but the producer will always take an advantage moreover to the publics. We can see that there is a different price of natural resources in Sabah and Semenanjung.
Other than that, the things that have been through maximization is human capital. Human capital plays an important role in achieving economic growth and development. Knack and Keefer (1997) argued that higher learning indicates that an individual is well equipped with information and better interpretation of information in engaging human capital. The higher the level of education, the higher the distribution of income obtains by an individual (Ozturk, 2001) but if we looking at today’s Malaysia. Human capital was replaced with machine and so on moreover towards bank institution. By that, every workers nowadays need to be more creative and be more independent for an example every fresh graduate need to know how to handle two works at the same time. According to Yunus (2014), innovation in education plays an important role in determining the direction of personal, social and economic growth within the nation. However, the issue arise is whether the nation is prepared in understanding the concept of human capital development and as well as putting in higher investment into education in gaining better attainment.
Other than utility maximization, there are the price mechanism in Malaysia economy. Price mechanism is a market based mechanism which refers to a wide variety ways of to merge up buyers and sellers through price. Buyers and seller use price as a signals to communicate their wants, and then exchange money for goods or resources, or vice versa. It is a way of transmit the consumers and the firms each other through their effect on price mechanism. The prices that results are the prices that firms and consumers have to accept. Other than price mechanism we also need to look at the demand and supply. Usually, the demand will allocate the price of things the higher the demand is the higher the price will be. Other than that, if the supply is limit then the price also will be higher so this two things will always affect the price mechanism in goods and also in services. In Malaysia, all the price mechanism will get intervention from the government as they want to make sure that the publics can afford to buy and use the services given. The price mechanism also determines how income is distributed in a capitalist economy. In such an economy, consumers and producers are largely the same people. Producers “sell goods at given prices to consumers for money, and consumers receive “incomes from producers in exchange for their services. The owners of factors of production who are all consumers sell their services at given prices for money to producers, and then spend that money to buy goods produced by producers. In fact, the price mechanism is a system of real flows from producers to consumers and from consumers to producers. Price mechanism works as follows. Prices will respond to shortages and surpluses. Market equilibrium point occurs when the quantity of demand and supply are equal and intersect each other. Equilibrium price is a price where the quantity demanded equals the quantity supplied. It is the price where there is no shortage or surplus will occurs. Surplus is where the quantity of supplied over the quantity demanded when the price is above the equilibrium. Shortage occurs when the quantity demanded is over the quantity supplied when the price is below the equilibrium. Here, we can define supply as the willingness of the seller to sell a good or services. In other can be said as the quantity of any good or services offered for sale at a given price over a period of time in a given market. At the equilibrium price, there will be no shortage or surplus. The equilibrium price however may not be the most desirable price. The government, therefore, may prefer to keep prices above or below the equilibrium price. If the government sets a minimum price above the equilibrium, a price floor, there will be a surplus. Price will not be allowed to fall to eliminate this surplus. However, on the other hand, if the government sets a maximum price below the equilibrium, a price ceiling, there will be a shortage. Price will not be allowed to rise to eliminate this shortage. First of all, the government intervention in the market can create positive and negative results. Since Malaysia is a mixed economy so it has a little degree of intervention of government. The government does not have direct intervention in everything, but it may be indirectly.
A mixed economy solves the problem of what to produce and in what quantities in two ways. First, the market mechanism (i.e. forces of demand and supply) helps the private sector in deciding what commodities to produce and in what quantities they are given. So the quantity will fixed the prices of any things. In those spheres of production where the private sector competes with the public sector, the nature and quantities of commodities to be produced are also decided by the market mechanism. By that we can see that the differences between public and private sectors. For an example, in hospital. There are two things that involve in hospital which is services and payment. Those who can afford can choose private sector and can get a better service from the private hospital while those who cannot afford can stay at the public hospital and its take time for them to be serve. This is also related to government intervention through their government hospitality facilities where public are treated for their medical issues at a very low price which begin with just RM1.00 for registrations. This facility by government has an absolute 0% profit to the firm which is entirely supported by the taxes income which the government earns through taxation which it will affect towards the government issues
As discuss earlier, subsides also be one of the price mechanism in Malaysia. For an example, oil prices. Which the subsides has taken back by the old government and they will refer at the world fuel price and it will change every Wednesday. In every country the government do subsidize certain goods and services which are high in price and not affordable by the poor community, this is to avoid the concept of rich becoming richer and poor becoming poorer not being able to live a standard live with certain needed daily basic things. Governmental subsidiaries are normally in formation of either product or service. Like all other countries, Malaysia as well have well understood the nation difficulties and subsidize certain goods and services which are high in price and are produced mainly for rich people. Example of subsidized goods and services in Malaysia are like petrol, NGV gas, sugar and many more.
In other hand, government intervention also exist in Malaysia when it comes to the issue of pollution, environment and global warming where the government sets rules and regulation to be implemented by all organizations and public to ensure of a safe living environment globally and to contribute to keep the mother earth safe. Here, government intervene with implying rules of reducing electricity wastage, water wastage and also reduce the use of plastic bags in shopping complex. The implementations of reducing the use of plastic bags in shopping complex throughout Malaysia have given a real good feedback where every Saturdays are to be a day without plastic bags in any shopping complex.
As a conclusion, Malaysia practices mixed economy system which means the degree of government intervention and the public are at balance in market decision making but the government should intervene the economy by the right way, correct the defects by using suitable solutions, overcome the economy problem by well and manage the finance by rational. It is because Malaysia is a mixed economy system, the government have to intervene it by professionally and take it seriously, if not, there will some negative indication will occur such as, supplier and consumer dissatisfaction, public conduct demonstrate because of the price of daily needs of goods increase by suddenly and so on. This economy system is mostly based on free enterprise principle but it differs as there is some form of direct intervention and indirect government intervention. The degree of government intervention on decision making in market is depending on the scarcity of the resources used in the specific market for example the government control in petroleum market in Malaysia is very high compare with the automobile market. However, the writer concludes that the price determination in Malaysia is depending on the degree of the scarcity of resources in the market and government intervention is mostly in the issue of taxation and scarce resources. Overall, hereby the government does not have direct intervention in everything but it may have indirectly through taxation