Question

Discuss the implementation of price
ceiling in Malaysia.
Any one give me 2 cases from news with graph to explain?thank u so much!

Answer 1

1) Price ceiling for petrol in Malaysia

A binding price ceiling implemented by the Government makes it illegal to set up the price of petrol above a maximum level decided by the authorities. This is implemented to protect the domestic consumers from the continually fluctuating fuel prices and make petrol (a necessity) affordable for the masses. The government had set a price ceiling for petrol to remain at the price of RM2.70 per litre until the end of year 2008.

2) Drug Price controls in Malaysia

Malaysia is expected to roll out price ceilings at the wholesale and retail levels for a number of drugs in the country. While this might be alarming for the pharmaceutical companies as profit margins might take a dive, this step is being taken to ensure drug prices come down in the country. The move is touted to yield significant cost benefits to the public.

Price ceilings generally create a situation of excess demand. At the lower price P, the demand for the commodity is higher than the supply of the commodity. It might lead to a situation of shortage of the commodity if the profit margins of the producers are hit hard. Therefore such rules should be set up carefully with government backed subsidies and support for the producers too.