ECONOMIC INFLUENCE ON FAMILY AND CONSUMER PN ZURONI MD JUSOH DEPARTMENT OF CONSUMER AND RESOURCE MANAGEMENT, FACULTY O

1. ECONOMIC INFLUENCE ON FAMILY AND CONSUMER  PN ZURONI MD JUSOH DEPARTMENT OF CONSUMER AND RESOURCE MANAGEMENT, FACULTY OF HUMAN ECOLOGY

2. MARKET STRUCTURE  • The market is a place where exchange of goods and services through the purchase and sale between the purchaser and manufacturer. • Consists of: • Perfect Competition • Imperfect Competition • Monopoly • Monopolistic • Oligopoly

3. Characteristics of the market classification • Number of firms exist • Types of goods produced • Freedom of entry and exit barriers and market • The pricing of goods • The existence of non-price competition such as advertising, offer gifts, etc..

4. Perfect Competition • The main features: • Number of buyers and sellers more • Each firm produces output in small quantities • Therefore, every firm -price taker and does not affect the market • Each buyer uses a small portion of the output market and can not influence market prices

5. Cont. • The firm as a price taker • Price is determined by supply and demand balance • This price will be taken by the firms as their sales prices • I.e. the concept of the firm as a price taker • If seller - P f> P m  no buyer • If seller - P f <P m  loss 

6. Cont. • Firms have freedom of market entry and exit • There are no restrictions to entry and exit • Eg. if there are huge profits from foreign firms enter the market freely. Or vice versa • Homogeneous output • Output by each firm are the same and similar (complete replacement) • Therefore there is no firm has an advantage over other firms  •  output do not charge high prices  •  output will be sold at the same price • Non-price competition - eg. advertisement does not occur • Why? Output is homogeneous, the user gives priority similarly on output

7. Cont. • Sellers and buyers have perfect knowledge • I.e. knows the ins and outs of the market (for output and factors) • Producers know how to get FOP (eg land) are cheap and sell at high prices • User  output • The result: there is no firm that dared to raise (lower) the price of their output for fear of losing buyers (less problems in the long term results)

8. Cont. • Perfectness of factor mobility • I.e. FOP (esp. Labor) to move freely to get good returns • There is no monopoly • Mobility FOP occur until reaching a equilibrium price • It moved to the manufacturers that provide high returns • So long as there are different prices FOP • When the FOP and outputs the same price, the cost of mobility equal to zero

9. Monopoly • Characteristics • Availability of a seller and many buyers • Industry in a monopoly market consists of a firm.I.e. the firm = industry • The firm has the power to determine prices and output quantity • Buyers do not have full authority to influence market prices

10. Cont. • Goods produced no close substitutes • There are no close substitutes • Goods can not be obtained from elsewhere • Users had to use the goods even if the price is expensive

11. Cont. • Barriers to entry and exit • Barriers to entry in the form: • Restrictions in the form of legal protections • Capital size requirements • High technology development needs • The firm is not easy out or shut down their operations with as they please when losses • E.g. government monopoly that provides basic needs - e.g. a monopoly in the supply of water service

12. Cont. • Without market competition • Because of a firm and its products have no close substitutes => do not have non-price competition - e.g. advertising and promotion • Advertisement • to introduce products • To preserve the good name of the community • Either identical or branded monopoly output => not an important issue because it is a single firm

13. Monopolistic competition • A.k.a. monopolistic => have a lot of firms and a variety of brand name goods • Characteristics: • The number of large firms • Branded goods • Freedom of entry and exit of the industry • Influence on the price • Non-price competition

14. Cont. • The number of large firms • Many firms but not by PPS • Therefore, no firm affects the market • The size of the monopolistic firms are approximately the same • Output produced by firms <output of the total market

15. Cont. • Branded goods • Output => is physically more or less the same (in terms of raw materials & mode of production) • Firms a significant difference, in terms of: • Brand • Packaging • Advertising style • Services • Marketing effectiveness

16. Cont. • Monopolistic output of a substitute is almost, but not a perfect substitute • Eg soap, cooking oil, beverages, footwear, clothing • Ie differences in brand • Freedom of entry and exit into the industry • It's easier than the monopoly • Firms should be able to produce the items in a slightly different with the existing market • The items also should be attractive and suitable brands to compete in the market

17. Cont. • Influence on the price • Monopolistic influence on the price of goods • The increase in prices => customer will buy a cheaper replacement => so the sales will decline (vice versa) • But firms can not win ALL the goods is not a substitute for proper

18. Cont. • Non-price competition • Firms producing basically similar • Thus, firms need to highlight the differences in terms of brand • Ads, packaging, marketing effectively (eg special offers) • Ie influence consumer perceptions and preferences of the items the firm's brand

19. Oligopoly • There are only a few firms in an industry only • Firms influence each other (I.e. the action taken by one firm can affect the other firms) • Consists of: • Perfect oligopoly: • Have several firms that produce goods / services on the same • Industry eg petroleum, cement, bus, taxi • Oligopoly is not perfect (imperfect): • Consists of several firms that produce goods that vary in quality, design and price • Eg car manufacturing industry and the computer

20. Cont. • Characteristics of oligopoly market • Number of firms • Consists of only a few firms • Firms dominate the bulk of the market • Thus, their interplay, especially on prices and output • Type of goods • Firms producing the same or nearly the same • Ie perfect oligopoly - producing the same • Ie oligopoly is not perfect - producing different goods in terms of design and brand

21. Cont. • Entry of new firms • Not so easy. • WHY? Barriers in terms of • Capital needs to compete with firms that have existed • Factors holding patents • Pricing • Because each firm has influence, the market price determined by the cooperation between firms • This collaboration enables high pricing • Without co-operation - will not stabilize market prices and low => thus less profit • Thus, each firm must take into account the actions of other firms (especially in determining prices and output) => to maximize profits

22. Cont. • Non-price competition • The goods produced are the same or nearly the same • Thus, an important non-price competition • Type the most important non-price competition - Ads • Most effective and dynamic • Generate loyalty to the brand • Expressed the assumption that the output of a particular firm is better and the quality of other firms

23. INFLATION • Circumstances in which the rise in prices and factors affecting the production and supply capacity by the user • Continuing inflation will reduce purchasing power due to rising prices are not followed by increases in income • The inflation rate measured by the Consumer Price Index (CPI)

24. CONSUMER PRICE INDEX (CPI)  • Changes in the average price of a goods and services specified, which represents the expenditure pattern of an average household in the Peninsular, Sabah and Sarawak with a particular year as the base year. • price changes affect the well being of consumers and users need a lot of money to make ends meet. • Price changes are measured using the consumer price index (CPI) by the department of statistics • Price Index is an index used to indicate the average changes in retail prices of basket of goods and services purchased by the family.

25. Limitations of the CPI  • Fixed basket of goods • Contrast between the consumer • Purchasing power • Factors influencing the use of goods • Changing the quality of goods, new goods produced

26. Weighted Price Index(WPI) • Formula • WPI = P 0 X Weight X 100 P a • CPI (W) = ∑ WPI ∑ weighted 

27. Contoh • Calculate the WPI, the CPI,

28. The formula for calculating the CPI • Laspeyres and Passche • Laspeyres formula, (in Malaysia) • Comparing the cost of the base year basket of goods measured in the new year with a group of similar goods on the basis • L = P (P 1, P 0, Q 0) • LPI = ∑P 1 Q 0 X 100 •              ∑ P 0 Q 0

29. Cont. • LPI = ∑P 1 Q 0 X 100 •              ∑ P 0 Q 0 • P1 = Price of goods in a current year • P0 = Price of goods on the basis (basic year) • Q0 = quantity of goods on the basis

30. The formula for calculating the CPI  • Paasche formula, • Comparing the cost of purchasing a new set of items assessed in the new year with a group of similar items valued at the base year. • S = P (P 1, P 0, Q 1) • SPI = ∑P 1 Q 1 X 100 •              ∑ P 0 Q 1 • P1 = Price of goods in the current year • P0 = Price of goods at the basis year • Q1 = quantity of goods in the current year

31. Contoh • Given the price and quantity of goods for the base year and current year. Calculate the Laspeyres and Paasche Price Index.. • Answer LPI = 212.5% SPI = 220%.

32. USE OF CPI  • The CPI is used to calculate the change in consumer purchasing power • Percentage change in the index used to measure the rate of inflation and is also used to • Consumer expenses • Basic wage adjustment • Picture of consumer purchasing power - influence the quality of life • Help plan the financial aspects

33. Value of Money  • Purchasing power which is the amount of goods and services that can be purchased with a sum of money. • Formula: • Money value =BPI- MVI X 100 BPI • Money value Index= BPI X 100 CPI • Inflation Rate = CPI - BPI X 100 • BPI

34. Reasons for changing money values  • Inflation - changes in prices (inflation increase with time) • Can not wait - quick to feel satisfaction • The time depends on the individual preferred • Risk - the uncertainty of future • - The economic situation may change.

35. Inflation  Definition • The increase in general price levels, continuous and not limited in the economy. • Also referred to as a condition in which too much money chasing few goods / services.

36. Reasons for inflation  • Excess demand (demand pull inflation) • Price increases of factors of production (cost-push inflation) • Consumer perception

37. Who is effects of inflation?  • There is profit, no loss • Except in the case of supply of inflation (as natural as drought, increased oil prices) • Profit from inflation - if the value of income / assets grow faster than prices: • Trade unions have the power • Business owner • Loss if the value of income / assets grew more slowly than prices. • Government employees with no union • Fixed income.

38. Effects of Inflation  • Distribution of income • The fixed income • Losses because the value of money falls, the purchasing power is also less. • Borrower • Make profit for debt is money down • Same amount of money can buy less than without inflation. • Lenders • Losses because the amount of money paid back by the borrower has gone down the power buy it.

39. Deflation (Unemployment)  • The population belongs to the people who work but do not give any contribution to the output of economic sectors. (Not employment) • The unemployment rate • = Number of unemployed x 100% • Number of employment • Level of full employment is achieved when a low unemployment rate (2% - 4%)

40. Unemployment Effects • Economic • The lack of output of goods / services of a country. • Income per capita (national output is divided by the total population) low population. • Social • Lost income - family instability (conflict). • Lost jobs - crime, pollution (squatters)

41. Conclusion  • Perfectly Competitive Markets - characteristics • Not perfect-competition market characteristics • Monopoly • Monopolistic competition (monopolistic) • Oligopoly Consumer Price Index (CPI) • Calculation, use • Value of Money - the calculation, the reasons for it • change • Inflation - definition, causes, effects of inflation • Deflation - the definition of the effects.

42. END OF LECTURE THANK YOU