In this particular study assignment, a topic of managerial economics has been selected and discussed to gather significant knowledge on the concept. Precisely, managerial economics can be identified as the study of managing resources affecting economic conditions of a nation in a cost-effective way (Arce, 2014). Through the understanding of market scenario and competitive market structure, the study of managerial economics can be applied to influence the output of an economy (Samuelson & Marks, 2015). By considering an issue related to managerial economics, the study reflects how theoretical concepts of managerial economics can be applied to improve the existing state of scenario. Fundamentally, the paper argues the economic aspects in detail through the limelight of Islamic principles and the perception of managerial economics to address the issue discussed in the article.
The study has been completely based on an article selected by the researcher to identify how the managerial economic principle has been linked to the news article. Invariably, the reported newspaper article reflects why traders in Sabah area should not increase the prices of food products showing an excuse of hike in Goods and Service Tax (GST). In order to clarify the article, a summary of the newspaper article has been provided. Moreover, the study also involves managerial theory and concepts alongside with appropriate Islamic principles to understand the facts presented in the article report. Evidently, the study describes why the concept of managerial economics and Islamic principles are evident to the issue. Decisively, on a broader perspective, the benefits of the managerial economic theory that will be applied to control the issue have been illustrated providing evidence.
In the selected article, the review of the existing situation of price hike of food products by the traders has been documented. In the meanwhile, the newspaper article has deliberately written to show the intensity and contribution of the Sabah Consumer Affairs and Consumer Affairs Association (CAPS) to check the prices of food products and items. According to the reported article, CAPS has urged the existing traders operating businesses in Sabah not to increase the prices of food products showing the excuse of GST (Astroawani.com, 2017). Evidently, James Bagah, the president of CAPS has clarified that price hike of food products due to GST is irrelevant. As the basic ingredients such as flour, vegetables, sugar, salt, fish, rice, and other necessary items are exempted from GST, the production cost of manufactured and packaged food products has not been affected at all. Basically, the reason behind price hike of food products by the traders is driven by personal greed and thirst of more profitability.
Reportedly, CAPS has asked the government to take the issue of price hike of food products on a serious note. According to the article, the license of such irresponsible traders and sellers can be cancelled under the Price Control and Anti-Profiteering Act 2011 if the traders are found guilty (Astroawani.com, 2017). Moreover, the Islamic principle must be taken into account by the traders as an increase in the cost of food items has put a lot more burden on the social consumers. Furthermore, boycotting such traders and market sellers can be identified as the most effective solution to deal with such unethical traders. According to James, price hike of food items has increased the cost of living and it has become burdensome for low-middle class income population of the nation. Therefore, the traders’ price hike policy must be monitored and controlled by the government if any unrealistic and unethical price hike took place.
Islamic principles have got a significant role in business and economics in the most of the Islamic countries. Islamic principle of morality has denied income from certain impermissible sources. Explicitly, scholars have reviewed that Quran and Hadith have a noteworthy impact on the economics of Islamic nations (Parvez, 2007). For instance, sources of income such as fraudulent, stealing, robbery, gambling, bribery, and interest are prohibited in Islam as these as considered as ‘Haram’. Based on such moral conduct of Islam, price hike of food products in the name of GST can be unethical. For the sake of Islamic principles, every source of income other than the mentioned sources is permissible if all the engaging parties in a business are benefitted. In case of the unethical price hike of food items showing the cause of GST, traders and sellers have enjoyed profitability while lower and middle class consumers have to pay higher prices. In this way, increased costs of products have become burdensome for the consumers. Therefore, the process has wrongfully created problems for one of the concerning party engaging in the business (Ahmad, Islam & Ismail, 2011).
According to the Islamic sharia, it is expected that Muslim people must follow the Islamic principles over every other aspect of their everyday life. Precisely, observance of moral qualities in business has been mandatory in Islam. Critically, the traders are ignoring the moral obligations of Islam in the current state of scenario (Naqvi, 2013). By evading to their moral principles, traders, who have increased the prices following unethical means, have violated the moral principles of Islam. Also, the current price hike can be termed as a fraudulent activity as well (Muhtada, 2012). Therefore, such wrongful source of earning must be condemned and the traders should rectify their mistakes as soon as possible to redress the grievances of the social public.
On the basis of the chosen article, it can be seen that the price of food items increases due to the greed of the traders that has been opposed by the Sabah Consumer Affairs and Consumer Affairs Association (CAPS). A rise in the price of daily need products or necessary goods can be a major issue for the economy. For instance, a person buying potato as their daily food requirement will intend to buy lesser quantity of the product due to the increase in the price (Bell & Martin, 2014). A diagram has been presented herein below for further explanation:
Figure: Fall in quantity demanded due to rise in price
Source: (Alhabeeb & Moffitt, 2013)
It can be seen from the above diagram that the rise in the price of the food commodities in the name of GST is an unethical mean used by the food traders in the current market scenario. A rise in the price of the commodities will lead to fall in the quantity demanded and consumption in the market (O’Brien, 2011). According to the above figure, a rise in the price of the food products will shift the equilibrium price level from P1 to P2 resulting in a fall in the quantity demanded from Q1 to Q2 (Alhabeeb & Moffitt, 2013). However, it is important to note that food items are necessary products that have inelastic demand. In other words, the change in the quantity demanded for food products will be lesser as compared to the change in the price (Dornstein, 2016). Hence, the new tactics of the food traders may increase their profitability margin due to no change in the cost of production or raw materials, but the strategy used by the traders are unethical as it is negatively impacting the consumption and spending of the bottom level consumers.
Moreover, if GST is implemented on food items, the extra money taken from the consumers will be used by the Government for the benefit of the common public. Furthermore, the cost of production of the food traders will also increase due to the introduction of new tax system over the food commodities (Alhabeeb & Moffitt, 2013). Hence, a downfall in the supply can also be evident due to the increase in the price level because of the introduction of the new tax system over food items. A diagram has been presented herein below for further understanding:
Figure: Change in market equilibrium due to implementation of GST
Source: (Brondoni, 2015)
It can be seen from the above figure that if the price increases due to the GST, a fall in the supply will be evident in the market. Implementation of GST will increase the price of raw materials in the food industry from P1 to Ptax, which will lead to a shift in the supply curve from S1 to Stax. Hence, a fall in the quantity consumed can be evident from q1 to qtax (Dornstein, 2016). However, in real scenario, it can be seen that no tax has been implemented over the necessary food items. On the other hand, the traders are just using the excuse of GST to increase the price of food products by a higher amount in order to seek a higher level of profitability. Therefore, the strategy used by the food traders is unethical in nature as it impacts the consumers spending negatively.
On the basis of the above analysis, it can be seen that the price of the food products are increase in the Sabah market in the name of GST. The policy used by the traders is unlawful and considered as ‘Haram’ from the Islamic perspective. Furthermore, by considering the managerial economic perspective, it can be seen that the unethical mean of increasing the price of food in the name of increased Goods and Service Tax is also problematic for the Malaysian economy. Moreover, the unethical mean of increase price will negatively impact the demand in the market and shift the market equilibrium towards a lower level of consumption (Hirschey & Bentzen, 2016). Decisively, an imbalance in the economy will be evident in the upcoming future. Therefore, it is important for the government to stop the ethical mean of increasing price of food in order to maintain equilibrium in the market. For instance, the government can make use of price ceiling and price flooring policy in order to introduce a maximum and minimum level of price for particular commodities that are being sold at a higher price (Salvatore, 2012). It will not only benefit the consumers by saving them from paying unethical extra prices, but also minimise the level of price war in the market.
Conclusion
By considering the above analysis, it can be seen that the food traders are using unethical means to increase the price of the commodities in order to seek a higher level of profitability. On the basis of the Islamic perspective, the increase of price that negatively impacts the spending of the consumers for personal benefits is considered as ‘haram’. Alternatively, from the managerial economic perspective, the unethical increase in the price of food will negatively impact the consumption level in the market. Conclusively, it is important for the government of Malaysia to use price ceiling and price flooring strategy to maintain equilibrium in the market.
References
Ahmad, K., Islam, R., & Ismail, Y. (2011). Issues in Islamic management (1st ed.). Kuala Lumpur, Malaysia: IIUM Press, International Islamic University Malaysia.
Alhabeeb, M., & Moffitt, L. (2013). Managerial economics (4th ed.). Hoboken, New Jersey: Wiley.
Arce, D. (2014). Conspicuous By Its Absence: Ethics and Managerial Economics. Journal Of Business Ethics, 54(3), 259-274.
Bell, R., & Martin, J. (2014). Managerial communication (2nd ed.). New York: Business Expert Press.
Brondoni, S. (2015). Managerial Economics and Global Competition. Symphonya. Emerging Issues In Management, (1).
Do not make GST a reason to raise food prices – CAPS. (2017). Astroawani.com. Retrieved October 2017, from
https://www.astroawani.com/berita-malaysia/jangan-jadikan-gst-alasan-naikkan-harga-makanan-caps-158922
Dornstein, M. (2016). Managerial theories, social responsibility, and goal orientations of top-level management in state-owned enterprise. Journal Of Behavioral Economics, 5(2), 65-91.
Hirschey, M., & Bentzen, E. (2016). Managerial economics (3rd ed.). Andover: Cengage Learning.
Muhtada, D. (2012). Managing workforce diversity: an Islamic perspective. Indonesian Journal Of Islam And Muslim Societies, 2(1), 78.
Naqvi, S. (2013). Islam, economics, and society (3rd ed.). London: Taylor and Francis.
O’Brien, T. (2011). Managerial economics and operating beta. Managerial And Decision Economics, 32(3), 175-191.
Parvez, Z. (2007). Lack of business responsibility: an Islamic perspective. International Journal Of Business Governance And Ethics, 3(1), 42.
Salvatore, D. (2012). Managerial economics in a global economy (2nd ed.). Oxford: Oxford University Press.
Samuelson, W., & Marks, S. (2015). Managerial economics (2nd ed.). Hoboken, N.J.: Wiley.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download