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  • Lik Wai Toh

    November 13, 2021 at 8:58 pm

    The government policy can be affect microeconomic. The effects whenever the policy implement, it will have its effects in changing the inputs and incentives for individual economic decisions. For example, if the governement remove the import tax for electronic car and in the same time increase petrol ceiling price for RON95. People will shift from petrol car to electronic car. It’s because people can enjoy the cheaper price on electronic car and in the same time, they can spend less on higher petrol price. Sometime the government policy is intentional. For example is the government gives a subsidy to farmers so that it can let their businesses more profitable and help farm production. On the other hand, the government can impose a tax on cigarettes and alcohol to discourage the purchasing behaviour.

    Businesses have to always stay close and aware the govrnment policy. As the government policy will directly or indirectly impact the operation of the businesses. For example, if the government increase the minimum wages, this will directly impact the operating expenses. If the cost cannot be transferred to the end consumers, the businesses have to absorb the cost and make less profit.