Malaysia's Proton Car

Based on newspaper Sin Chew Daily, 20th September 2012, http://www.mysinchew.com/node/77845. The news talk about DRB- Hicom aims top spot for Proton sales this year.

Car is a wheeled motor vehicle used for transporting passengers, which also carries its own or motor.  There is a main local Malaysia automobile brands which have a good demand from consumers, it is referring to Proton. In Malaysia, automobile industry is among of the industries that brings good development to Malaysia economic. National car manufacturer Proton Holdings Bhd (Proton) topped car sales year-to-date up to May 2011, become the leadership in automobile market. On the other hand, there have some foreign brands brings convincing and a high demand to the consumers in Malaysia. Therefore, most of the reason affected demand and supply of proton car in Malaysia are the prices of the product, prices of related goods produced, and the people average income.

The quantity demanded of proton car is the amount that consumers plan to buy during a given time period at a particular price. Thus, the main reason to influence quantity demanded of proton car is the price.  The National Automotive Policy aims to improve the sale of local brand in automobile industry as a result so government to extract a high tax on foreign brands car. The middle and lowers income families can affordable to buy proton car which have the low price with relatively low interest rate. According to the demand curve shows the relationship between the price and quantity demand, they must increase the quantities demanded proton car from Q1 moves to Q2 of when the price is decrease from P1 to P2.


Besides that, the second reason to influence demand of proton car is people income. As you know, an increase of consumer GDP per capita will also negatively affect Proton sales, because consumers were open to more different option from different manufacturers such as Toyota, Honda, and others when having higher income level. Faced with a higher price and an unchanged or low income, people just can afford to buy proton car which is lower price in Malaysia. Thus, the demand of proton car will increase when people’s income decrease.

Apart from this, the prices of related goods are the factor to influence the demand of proton car in Malaysia. A substitute is a good that can be used in place of another good. The strong competition to Proton is Honda, Toyota, Hyundai etc. Proton as a latecomer, the world automobile market has already been too crowded with variety brands. According to demand curve, this few brands will influence the demand of proton car. For an example, the quantity demand of proton will decrease when the price of Toyota decrease. In addition, price of complement like petrol will influence the demand of Proton. Higher petrol prices and increased cost of raw materials and manufacturing resulting in lower profit margins, it will influence the quantity demand of Proton car. According to demand curve figure, the quantity demand will decrease from D1 to D2 when the petrol’s price increase from P1 moves to P2. Therefore, the prices of related goods are the main reason to influence demand of proton car also.

On the other hand, there are some reasons to influence quantity supply of Proton car in Malaysia.  The first reason to affect the quantity supply is proton car’s price. Price of the product will be one of the most important determinants of how many product should be supply. For an example, a higher price encourages supplies produce and offer for sale more proton car. Beside that, people’s income will affect the supply of proton car. The sale revenue of Proton will decrease when people’s income are increase, because people have more choice to choose what brands they want to buy. As a result, the Proton supplies will decrease the quantity supply when the sale is not good because of people’s income increase.

Moreover, the prices of related goods are the factor to influence the supply of proton car in Malaysia. Steel and aluminum is the main materials to build a car. Proton car and motor cycle are substitutes in production-goods that can be produced by using steel and aluminum. The quantity supply of Proton car will decrease when the motor cycle price increase. For example, if the price of motor cycle rises, firms switch production from Proton to motor cycle, because firms can earn more profit through production motor cycle.

Lastly, there are some factors that affect elasticity of supply. The most important reason to influence elasticity of supply is time frame for the supply decision. In the short run sugar producer will only be able to increase input of labor to increase supply of commodities but the supply change will be little because other factors of production such as technology and mechanical may not be increased in the same proportion and may limit the supply. Therefore, the supply of sugar is inelastic in a short run. However, in the long run a firm will increase the input of all factors of production and thus the sugar’s supply becomes more price elastic. Second factor to affect elasticity of sugar’s supply is resource substitution possibilities. Sugar can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks. Furthermore, sugar can produced in many different countries, proof that the supply of sugar is highly elastic.

In conclusion, there are some factors to affect demand and supply of sugar, influence of cancel subsidy and elasticity of sugar.  The government's decision was reasonable, gradually cancel the allowance to let consumer have enough time to adapt. Besides that, cancel 20 cents subsidy of sugar will not be a significant impact. Consumer should identity government’s decision, then together to reduce the financial burden of our government.

                                                                                                                                    by Chew Chia Yee