Figure 1
The statement made by Ongkili indicates that the fishery industry of Malaysia is having inefficiency because it couldn’t fully utilize and allocate its marine resources to the production in fishery. In another words, the resources is unemployed or misallocated. Base on the PPF (Production Possibilities Frontier) curve shown in figure one, Malaysia’s PPF is below the curve, which is D. The area which is below the curve is always attainable because the resources are sufficient for production. It is proven fishery industry of Malaysia does not fully employ its resources or else, the resources were misallocated.
3.2 Change in supply
Change in supply always happen when there is any factor that influences the selling plans besides the changes in price of good ( ). Due to the efficiency of production for fishery industry, marine exports have been decreasing since the past few years, according to the article. When pollutions, climate change and other production constraints such as water quality and diseases affect marine exports, it also alters the supply curve. Those factors contribute to the reduction in supply. Refers Figure 2:
Figure 2
Base on Figure 2, those factors contribute to the reduction in supply. This causes a leftward shift of the supply curve from S0 to S1. The Equilibrium point moved from E to E’. As the equilibrium point changed, the price of marine product increases from P0 to P1, meanwhile, reduce of supply also caused the quantity of marine products in the market to reduce, as the quantity moved from Q0 to Q1.
3.3 Shortage
Furthermore, the article had also stated that China is one of the countries which have high demand on Malaysia’s exported marine products (Revolutionise fishery export industry: Ongkili 2009). By applying the ceteris paribus assumption here, where all the other factors remain constant, since Malaysia’s marine exports have been decreasing for the past few years, it will eventually cause a shortage in China, due to the excess demand and limited supply of marine products.
Figure 3
By referring to Figure 4, we can see while the supply curve shift leftward from S0 to S1, the equilibrium price also changed from E to E’ as well as the equilibrium quantity. Before the supply of marine was decreased, the equilibrium price and quantity was set at P0 and Q0. However, after the supply curve shifted leftward, the equilibrium price eventually increased to P1. While the consumer is only able to pay for the marine products at the price of P0 with quantity demanded of Q0, the supplier is only able to produce and supply Q2 of marine products at the price of P0, hence the shortage occurs, which shown in the shaded area of the diagram in Figure 3.
3.4 Elasticity
Price elasticity of demand for a good is depends on the responsiveness of the quantity demanded to a change in price, when all the other affects on buyers remain constant ( ). According to an estimated price elasticities of demand for various goods and services which is including fish, the elasticitiy for fish is approximately 0.5 ( ). When the elasticity of a good is less than 1, it would be inelastic. Hence, fish is inelastic because its elasticity is only 0.5.
Fish can be categorized as a marine product and it is a basic consumption for human especially for its protein and fish oil. In addition, there is no substitute good for fish. Therefore, when the price of marine products increased, the quantity demanded for it won’t have much influence, it will only reduce by a bit.
Figure 4
By referring to the Figure 4 as below, when P0 increased to P1 in large scale, but the quantity demanded only decreased in small scale, from Q0 to Q1. It indicates that the quantity demanded is not very responsive to the change in price, thus it is inelastic.
3.5 Change in supply (Technology)
A change in demand can be defined as any factors other than price changes of a good will influence the buying plans of consumer. There are six main factors which cause the changes in demand. There are the price of related goods, income, expected future prices, expected future income, population and preferences (Mctaggart, Findlay and
Parkin 2007, 62).
From the article, it is known that Malaysia’s marine products and fishery export had decreased since last few years. This occurs because of pollution, change in climate and other production limitations such as quality of water and the disease attack (Revolutionise fishery export industry: Ongkili 2009). Therefore, due to the decrease in marine products, this will result in the supply curve shifts to the left, referring to Figure 2. However, Minister Datuk Dr Maximus Ongkili also stated that Malaysia needs to undertake revolution in technology to maintain its marine products and solve the problem of decreasing in fishery export. Besides, he also declares that the local entrepreneurs can acquire a range of technologies from the foreign countries. For instance, Global Hi-Q farm had already been applying the Taiwanese technique and technology (Revolutionise fishery export industry: Ongkili 2009). As a result, this positive technology will increase the supply of marine products and help in solving the export’s problem.
Figure 5
By referring to Figure 5, suppose that the supply curve of marine product is S0 but after applying modern technology, the supply curve shifts from S0 to S1 which shows that it shifts to the right where the quantity supplied of marine product has increased. This will then result in equilibrium quantity to increase from Q0 to Q1 and equilibrium price to decrease from P0 to P1.
4.0 Conclusion
In conclusion, the news article showed the inefficiency of Malaysia in their fishery industry. The inefficiency indirectly brings impacts to the supply of marine products and caused shortage for the demand of marine products. However, by implanting the new technology from foreign country in fishery industry, it is able to increase the productivity for marine products in no days. As there are many other factors which may affects the market for marine product, the analysis made above is based on the economic theories and models and also the ceteris paribus assumption. Therefore, although it is not entirely true situation for the market of marine products in real world, but the economic theories and assumption helped in the explanation of the analysis about the market of marine product, involving all the relevant factors.
