- MemberNovember 8, 2021 at 7:55 pm
“Discuss your opinion on government intervention and how understanding consumer behaviors shape your business strategies?”
Economics is the study of economy and is defined as ‘The study of the production, distribution and consumption of wealth in human society’ (The Economist), as we look into the main issue on scarcity of resources and the demand and supply of any product to the determination on price. Government intervention is defined as a ‘regulatory action taken by government that seek to change the decisions made by individuals, groups and organisations about social and economic matters.
Government intervention is any action carried out by the government that affects the market with the objective of changing the free market equilibrium / outcome.’ (Tutor2u, 2018).
As such, government intervenes on public goods (eg. roads n street lamps), common known as public goods, a basic needs in the layman terms for the society. It is by general that organisations do not provide public goods, but only private goods as they are setup with the common view in making profits. Henceforth, the supply of public goods will be omitted based on this concept and therefore government intervention takes place. In general, price will be set based on the theory of invisible hands by Adam Smith through the demand and supply curve, but, government will intervention also on basic goods (eg. necessities like rice, sugar) and will set a ceiling price on such private goods. This happens so that organisations producing and selling these products cannot exploit onto the people as these are basic needs with high demand and people are willing to pay higher in order to obtain these goods. As such, government will intervene these goods so that organisations will be unable to make extraordinary profits from such basic needs, allowing citizens to be able to benefit from the usage of these goods. I do believe that government intervention on these area are beneficial for the good of the public.
But however, in my opinion, govt intervention shouldn’t be on non-necessity private goods with the example on the recent cases of Libresse issue and Timah issue as these are private goods and they are non-necessity. Government intervention on such, in my opinion will be a waste of resources and would become non-beneficial on economical terms.
As mentioned on the definition of Economics, that is the study of economy and prices are set mainly on demand and supply, we understand that the higher the demand and the lesser the supply, shall result in a higher price set on a particular good. Henceforth, by the understanding of consumer behavior, we shall we able to know the demand of such goods and considering and determining the supply as a manufacturer or seller, we shall be able to forecast our profits and margin. Also, at the same time, as we understand that demand will affect the pricing set, we are also able to draw up our business strategies by educating and marketing the people on the knowledge of the good, and creating higher demand on the good.
– Low Wee Sern, Sheng