Hello to my beloved readers! I want to share you guys what I've read an article and I've did some analysis. Do have a look! =)

Does the stock feed supply and culling old layer hens have the big affects on Demand & Supply?
Ever since stock feed such as corn and soybean meal increased in price by up to 80% in 2011, this leads farmers to reduce production costs and this year will be reduce more due to the drought in United States on 2012. This will caused the decrease of stock feed supply and culling up to 10% more hens which means decreasing hens supply. The shortage is 5% of 25 million layer hens which produce 22 million eggs per day and its price increase to two sen.

How the stock feed supply affect the price of egg??
According to the article, due to the drought weather in the United States, it will cause the supply of stock feed  to decrease. Therefore,  the price for stock feed  and the price for egg will be increase. From the article, it is stated that according to the farmers, production cost cover 80% for stock feed, they had forced to cull more 10% old layer hens in each cycle of one to three months to make room for younger and more productive hens. It says that because stock feed is consumed by the hens. As the supply of the stock feed decrease, the hens won’t be have enough amount of stock feed to be consumed. This will cause a shortage on the consumption of the hen’s stock feed. Therefore, they would have to decrease the amount of hens in order to solve this shortage. This situation can also cause the supply of eggs that produced by the hens to decrease as well which can cause the price of the eggs to rise. This situation can be easily explained by using the graph below.

As shown in the graph, a decrease in supply of eggs would cause the supply curve to shift to the left. Thus, there is a shortage below market equilibrium price, so in order to solve this shortage, the price of the have to be increase. Consequently, the new equilibrium price occurs when the price of stock feed increasing but will decrease the equilibrium quantity.

Besides of the situation from the article, there is several other reason that will cause the demand and supply curve to shift. One of the reasons that cause the supply curve to shift is the price of factors of production. According to the law of supply, if the cost production increase, the price for the goods will tend to increase, as a result, supply will fall. For example, The strawberry cost of production increase from $4- $6, the price for the strawberry will tend to increase from $8 - $10, as a result, supply of strawberry will fall. Besides that, the state of technology will also cause the supply curve to shift. It stated that if the technology need in producing the goods are far better and advance, the quantity of goods produce will increase. Therefore, the quantity supply for the goods will increase. For example, as there is advance technology such as machine, the bubble tea are been produced by the machine. The quantity supply of the bubble tea will increase. This will reduce the labour cost and could save time.There some of the factors that cause the shifts of the demand curve which includes the price of the good itself and the level of income. The factor of the price of the goods itself stated that with the assumption of ceteris paribus, if the price of a good rises, the quantity demanded for the good falls. For example, An apple of price increase from $3 to $5, the quantity demanded for the apple falls because this is a burden of the ability of consumer.  Furthermore, for the level of income, it stated that If the level of income is high, the demand for a particular good will be higher even price of the good is remain unchanged. For example, a household’s level of income increases, the consumption of food increases even though price of food remained constant.

Why the price for stock feed increase???
Due to the drought in the United States, this will increase the price of stock feed to ease the situation of drought. When the price of stock feed increase, the demand for the stock feed supply will decrease. The demand will decrease is because they not able to consumed due to its price increase. 

In conclusion, throughout my research is that a company called Deere which is offers irrigation tools, GPS- powered planting management systems, and other gear for farmers and landscapers are able to defense in the face of an ongoing drought. Even without a drought, these systems would likely boost productivity anyway. In my opinion, this way can produce more stock feed and it is suitable for drought weather. Gradually, the supply curve will shift to the right when stock feed increases, hens supply increase, egg supply increase and as a result, price of the eggs decreases. This will cause a surplus on the consumption of the hen’s stock feed and reduce culling hens. Hence, this would not cause people to find a substitute for chicken eggs and this will avoid the research on making fake chicken eggs.

Money   Tree

Budget Deficit

What is budget deficit???
Let me explain to you all…  =)

A financial situation that occurs when an entity has more money going out than coming in as known as government spending more than income. Government budget deficit as known as negative balance. The term “Benefit Deficit” is most commonly used to refer to government spending rather than business or individual spending. When it refers to federal government spending, a budget deficit is also known as the “National Debts.” The Government budget balance, also commonly referred to as General government balance, Public budget balance, or Public fiscal balance, is the overall result of a country’s general government budget over the course of an accounting period, usually one year. It includes all government levels (from national to local) and public social security funds. The budget balance is the difference between government revenues and spending. 

How if government don’t control?

If government doesn’t control their spending, they keep using the money, they will over spend the money and they don’t have enough money to cover and use for the next few year.  For example, Japan is good at their yearly expenses and the country is able to avoid over spending. If government no ability to solve the problem, it is because of over spending, they need to borrow the money from either within their country or outside their country, this will cause country owe more money than the past. If government borrow money with others means that this is a debts or liability as known as “National debts”. If government doesn’t have money to pay, budget per year will deficit.

My Opinion

In my opinion, a government budget is a legal document that is often passed by the legislature, approve by the chief executive or president. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues. Government should saving the cash at the bank or a safe to use it in the future and not to over spending and use in appropriate places. Revenue is one of the basic elements of any budget.

The other basic element of any budget is expenses. In the case of the government, revenues are derived primarily from taxes. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits. Government should not spend the money in dinner or having party.

Budgets have an economic, political and technical basis. Unlike a pure economic budget, they are not entirely designed to allocate scarce resources for the best economic use. The technical element is the forecast of the likely levels of revenues and expenses. So government need to save more the money and not to spend more their money.

By Jun Liang, Loh.

BNM comfortable with current monetary

policy of 3 pct OPR

            I had read about a news article about the monetary policy in Malaysia. In that article, it stated that Bank Negara Malaysia (BNM) which is the central bank of Malaysia had decided to remain the overnight policy rate (OPR) at 3%. It is says that the monetary policy in Malaysia is accommodative and the research arm of MIDF Amanah Investment Bank Berhad said that the BNM is comfortable in term of addressing the inflation and liquidity while boosting growth. Besides, they also said that if the economic condition had become worsen, any reduction on the OPR can be carrying out. Furthermore, the research house also believes that there’s a high probability of increase in the OPR from 3% to 3.25%.

            Before I get into the main topic, I believed that some of the people who don’t understand what are overnight policy rate (OPR) as I had stated on the summary of the article. So, OPR is set by the Bank Negara Malaysia (BNM) which is imposed by the fund lending between two depository institutions overnight which balance with the central bank. According to the Principle of economics, interest rate refers to the rates in loans that the commercial banks provide to the general public. Well, there several factors which will affect the interest rate. Those factors comprises of the type of the monetary policy, open-market operation, and the reserve requirements. Monetary policy is defined as the central bank using some of the instrument in order to influence the economy by varying the interest rate and money supply. There’s two types of monetary policy include contractionary which is tight or restrictive monetary policy and expansionary which cheap or easy policy. The open-market operation involved in the purchase and sales of the government security in financial market so as to influence the size of the bank deposit. The reserve requirement influences the amount of money that the banking system can create with each amount of money of reserves.

           

            According to the summary of the news article, you guys would be wonder why the BNM decided to maintain the interest rate? Of course there will be some effect on the money supply through the changing on the interest rate that is affected by the causes above. Well with the assumption of constant GDP and price level which will cause the money demand curve to remain constant, if the government decided to undertake an expansionary monetary policy this will somehow increase the money supply. Therefore this will cause the money supply curve shifts to the right which will result in the interest rate to drop. In the other way, if the government undertake contractionary monetary policy it will cause the supply to decrease which results in the shifting of the money supply curve to the left that will cause the interest rate to increase.

For the open-market operation case, if the government buy more bonds,  the money supply will increase which the money supply curve will shifts to the right that will cause the interest rate to decrease whereas if the government sell more bonds this will cause the money supply which cause the money supply curve to shift to the left. Therefore, this will result in the interest rate to increase.

           Finally, in the reserve requirements, if the reserve ratio is lower, the money supply will increase. Therefore, the money supply curve will shift to the right which will cause the interest rate to fall. However, if the reserve ratio is higher, the money supply will decrease that will cause the money supply curve to shift to the left. Therefore, this will cause the interest rate to rise. The only effect on the changing of the interest rate is the public’s demand on acquiring the loans. When the interest rate is higher, the public will have more burden on acquiring the loans, the public’s demand on acquiring loans is lower whereas as the interest rate decrease, the public’s demand on acquiring loan is higher because the decrease on the interest rate can provide advantage for the public to acquiring loans. 

            To wrap up, in my points of view, I agree that the central bank which is the BNM had decided to remain the interest rate. According to the economy today, our Malaysia economy’s is still on the safe track. The 3% interest rate is just nice for our Malaysia economy in which the fluctuation rate of the interest rate is low. If the interest rate is too low, the people’s purchasing power will be excessively high. This will tend to cause the price of the assets and the cost of living to increase dramatically. Therefore, this situation will lead to inflation. In other way, if the interest rate is too high, the people’s purchasing power is low. People would prefer to keep their money in the bank instead of buying goods which will provide a disadvantage for the firms or companies in selling out their goods in which they will have lesser customer that will cause them to gain less profit and as this situation goes on, they would have to fired some of the employees which will cause a high rate of unemployment. For the company’s case, the excessively high in interest rate will create a burden for the companies to borrow money from bank. Therefore, the company will have to postpone their expansion and entrepreneurial activities because it’s too expensive for them to hire more employees for the expansion and the entrepreneurial activities. This will somehow lead to recession which will severely affect the economy.