Assignment Question

Locate a recent article (published within the last year) that discusses supply and demand of an exported good at the macro level. You can use the Hunt Library, newspapers, new stations, or other credible sources to locate an article. Analyze your selected country’s exported good and determine the market equilibrium. Include the following in your discussion. Identify the country chosen. Discuss the exported good. Define the Law of Supply and the Law of Demand. Examine the change in demand, change in quantity demanded, change in supply, and change in quantity supplied. State how these concepts apply to your selected country. Identify the determinants of supply and demand. Explain factors that will shift the supply and/or demand curves to the left and/or to the right. Summarize your findings using at least 250 words and provide a minimum of one reference.

Answer

Introduction

The global economy is shaped by the intricate forces of supply and demand, influencing trade dynamics among nations. One key aspect of international trade is the export of goods, which plays a pivotal role in a country’s economic growth and development. This essay explores the supply and demand of exported goods at the macro level, focusing on Malaysia as the selected country . We will discuss the goods that Malaysia exports, define the Law of Supply and the Law of Demand, and analyze changes in demand, quantity demanded, supply, and quantity supplied. Furthermore, we will identify the determinants of supply and demand and explain factors that can shift these curves.

Malaysia: An Overview

Malaysia, a Southeast Asian nation, boasts a diverse economy driven by manufacturing, services, and agriculture sectors (World Bank, 2020). In recent years, it has emerged as a key player in the global trade arena, consistently ranking among the world’s top exporters.

Exported Goods of Malaysia

Malaysia is renowned for its extensive range of exported goods, covering various sectors such as electronics, palm oil, petroleum, rubber, and natural gas (Malaysia External Trade Development Corporation, 2021). Electronics and electrical appliances, including semiconductors and integrated circuits, constitute a significant portion of Malaysia’s exports. Palm oil, another crucial export, holds a prominent position in the global edible oil market. Petroleum products, rubber, and natural gas are essential contributors to Malaysia’s export revenue. These exported goods play a vital role in the nation’s economic landscape.

Law of Supply and Law of Demand

Before delving into the analysis, it is essential to define the Law of Supply and the Law of Demand. The Law of Supply states that, all else being equal, the quantity supplied of a good will increase as its price rises, and conversely, it will decrease as the price falls (Mankiw, 2019). This principle highlights the positive relationship between price and quantity supplied.

On the other hand, the Law of Demand posits that, all else being equal, the quantity demanded of a good will decrease as its price rises, and it will increase as the price falls (Mankiw, 2019). This principle demonstrates the inverse relationship between price and quantity demanded.

Changes in Demand and Quantity Demanded

Changes in demand and quantity demanded can be influenced by various factors such as consumer preferences, income levels, and external events (Krugman & Wells, 2018). For Malaysia, a significant change in demand occurred in the palm oil industry due to increasing global awareness of sustainability and environmental concerns. Consumers and governments around the world have become more conscious of the environmental impact of palm oil production. As a result, there has been a shift in demand towards sustainably sourced palm oil products. This change in consumer preference has led to a decrease in demand for conventional palm oil and an increase in demand for sustainable palm oil.

In terms of quantity demanded, Malaysia experienced a surge in demand for electronic products during the COVID-19 pandemic, as remote work and online activities drove the need for electronic devices (The Star, 2020). This led to an increase in the quantity demanded for Malaysian electronics, particularly semiconductors and laptops, resulting in a boost to the country’s export revenue in this sector.

Changes in Supply and Quantity Supplied

Similarly, changes in supply and quantity supplied can be influenced by factors such as technological advancements, government policies, and natural disasters (Mankiw, 2019). Malaysia’s rubber industry provides an illustrative example. In recent years, advancements in rubber production technology have increased the efficiency of rubber harvesting and processing. This has led to an increase in the supply of rubber, resulting in higher quantity supplied to the global market.

However, natural disasters such as floods or droughts can disrupt the supply of agricultural products like palm oil and rice in Malaysia (The New Straits Times, 2020). These events can lead to a decrease in the quantity supplied, causing price fluctuations and potential supply shortages in the international market.

Determinants of Supply and Demand

Several determinants can influence the supply and demand curves of exported goods in Malaysia (Krugman & Wells, 2018). Some key factors include:

Government Policies: Government regulations, subsidies, and trade agreements can significantly impact supply and demand. For instance, trade agreements with neighboring countries can expand the market for Malaysian exports.

Exchange Rates: Fluctuations in exchange rates can affect the competitiveness of Malaysian goods in the international market. A weaker Malaysian Ringgit can make exports more attractive to foreign buyers.

Technological Advancements: Technological innovations can lead to increased production efficiency and higher supply. Malaysia’s adoption of advanced manufacturing technologies has contributed to the growth of its electronics exports.

Consumer Preferences: Changing consumer preferences for sustainable and ethically sourced products can shift demand patterns. Malaysia’s palm oil industry has had to adapt to meet these changing preferences.

Factors Shifting Supply and Demand Curves

The supply and demand curves can shift to the left (decrease) or to the right (increase) due to various factors (Mankiw, 2019). In Malaysia’s context, the following factors can lead to shifts:

Environmental Regulations: Stricter environmental regulations can lead to increased production costs and reduced supply for goods with significant environmental impacts, such as palm oil (The Edge Markets, 2019).

Economic Growth: Rapid economic growth in importing countries can lead to an increase in demand for Malaysian exports, shifting the demand curve to the right (Malaysia Ministry of International Trade and Industry, 2020).

Trade Agreements: Bilateral or multilateral trade agreements can open new markets and increase demand for Malaysian goods, shifting the demand curve to the right (The Star, 2021).

Technological Advancements: Innovations in production processes can lead to an increase in supply, shifting the supply curve to the right (Malaysia External Trade Development Corporation, 2022).

Conclusion

In conclusion, understanding the dynamics of supply and demand at the macro level is crucial for analyzing the export of goods in any country’s economy, including Malaysia. Malaysia’s diverse range of exported goods, including electronics, palm oil, petroleum, rubber, and natural gas, is influenced by various factors, including changes in demand and supply, technological advancements, government policies, and consumer preferences.

The laws of supply and demand provide a fundamental framework for comprehending how price changes affect the quantity demanded and supplied of goods. Analyzing changes in demand, quantity demanded, supply, and quantity supplied in Malaysia’s context reveals the dynamic nature of international trade.

Furthermore, identifying the determinants of supply and demand and understanding the factors that can shift these curves provides insights into the complexities of global trade. Government policies, exchange rates, technological advancements, and consumer preferences all play vital roles in shaping Malaysia’s export landscape.

As Malaysia continues to evolve in the global market, policymakers, businesses, and economists must closely monitor these supply and demand dynamics to make informed decisions and ensure the nation’s continued economic growth and prosperity.

References

Krugman, P. R., & Wells, R. (2018). Microeconomics (6th ed.). Worth Publishers.

Mankiw, N. G. (2019). Principles of economics (9th ed.). Cengage Learning.

Malaysia Ministry of International Trade and Industry. (2019). Malaysia’s Trade Performance 2019. 

World Bank. (2020). Malaysia Economic Monitor: Navigating a path to inclusive growth.

Malaysia External Trade Development Corporation. (2021). Palm Oil. 

Frequently Ask Questions ( FQA)

What is the significance of studying the supply and demand of exported goods at the macro level?

Answer: Studying supply and demand at the macro level is crucial for understanding how a country’s international trade impacts its economy. It helps in making informed policy decisions, analyzing economic trends, and predicting the effects of various factors on a nation’s exports.

What are some of the key exported goods of Malaysia?

Answer: Malaysia’s key exported goods include electronics, palm oil, petroleum products, rubber, and natural gas. These products play a vital role in the country’s economic development and trade balance.

Can you explain the Law of Supply and the Law of Demand briefly?

Answer: The Law of Supply states that as the price of a good increases, the quantity supplied also increases, and vice versa. The Law of Demand, on the other hand, asserts that as the price of a good rises, the quantity demanded decreases, and when the price falls, the quantity demanded increases.

How did changes in consumer preferences affect the palm oil industry in Malaysia?

Answer: Changes in consumer preferences towards sustainable and environmentally-friendly products have led to a shift in demand towards sustainably sourced palm oil. This shift has impacted Malaysia’s palm oil industry, with increased demand for sustainable palm oil products.

What factors influenced the surge in demand for electronic products in Malaysia during the COVID-19 pandemic?

Answer: The COVID-19 pandemic led to an increase in remote work and online activities, driving the demand for electronic devices such as laptops and semiconductors. This surge in demand was a result of the shift towards remote work and online learning.

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