Minimum Wage In Malaysia

 The article <Malaysia’s Minimum Wage set at $330 (RM 900)>
 which is based on 
<http://www.asiaone.com/News/AsiaOne+News/Malaysia/Story/A1Story20120501-343098.html>
  is about minimum wage policy in Malaysia. 

Prime Minister Datuk Seri Najib Razak announced that the government will implement minimum wage on private sector from January 2013, which was also mentioned in budget. Despite of opposition supporting RM 1100 or employees’ demand for RM 1200-RM 1500, the settled amount of minimum wage is RM 900 per month or RM 4.33 per hour for employees in the peninsula while RM 800 per month or RM 3.85 per hour is for workers in Sarawak, Sabah and the Federal Territory of Labuan. 

So, what happens when new minimum wage policy is enforced in Malaysia?

Graph before minimum wage

This is the graph before the government implements the minimum wage.

For instance, the company <A>  runs well with equilibrium wage rate of RM 3.23 hourly and equilibrium labor hours of 70 million which includes 400 workers. However, some changes occurred when new minimum wage is set.

Graph of minimum wage

The government imposes minimum wages as RM 4.33 per hour. At the minimum wage of RM 4.33 an hour, quantity supply of labor hours increases from 70 million to 90 million hours, but the firm’s demand for labor hours decreases from 70 million to 50 million hours of labor. 90 million hours of labor probably is the demand for 500 people who would like to have a job with new higher minimum wage, but the firm wants to have only 300 workers for 50 million hours of labor. So the gap between 90 million and 50 million, which is 40 million hours of labor, is created. If the minimum wage is set above the equilibrium wage rate and the quantity of labor hours supplied by employees exceeds the quantity demanded labor hours by employers, it results in a surplus of labor hour. Here, 40 million hours of labor which is also the 200 workers is a surplus of labor hour, and this is unemployment. Thus as the government imposes minimum wage, there are more people who are willing to work with higher wage. However, they are unable to find the jobs provided because the firms demand less workers.

Moreover, the firm may still need 70 million of labor hours to produce more or maintain their previous production. Although there are more people out there to work, the firm is not able to hire them due to the minimum wage. Therefore, black market will enter to fulfill 70 million of labor hours, and it leads the firm to hire someone illegally under the minimum wage.

By looking at the previous graph, we can notice that the wage below minimum wage of RM 4.33 is illegal and the firms are not allowed to give wages which is under the minimum wage to the employees.

Illegal minimum wage graph

However, since this production needs unskilled labor, the firm may hire low-skilled foreign workers who still demands to work with RM 3.23 which is below minimum wage. This will benefit the firm to save money on wages with RM 1.1 per hour and maintain the previous quantity of labor hours, by not affecting on their outputs.

Eventually it results in decreasing the labor demand of the firm for locals but increasing in the labor demand of the firm for foreigners.

The more decreases in demand of local labors, the more unemployed in Malaysia. 

Therefore, I think it is the only local people who will suffer from unemployment due to minimum wage when there are high possibilities that foreigners might replace them with under minimum wage. 

Then why are the firms in Malaysia not willing to take employees when the minimum wage is set?

 Here is another example of rubber glove industry.

According to Malaysian Rubber Glove Manufacturers Association, to process automation, around RM 500million will be invested by rubber glove manufacturers.

This indicates glove manufacture will use mechanic system in the future instead of using labor force. Once the minimum wage is set, the cost of labor is probably higher than applying machine. There are 60,000 workers and 45 manufactures in this industry. Assume that RM 900 is given as salary to these 60,000 people monthly. Is spending total amount of RM 54 million monthly (RM 900 x 60,000 workers) more valuable or investing RM 500 million for automation more valuable? It surely is investing. If there is any firm to choose “giving salary”, that firm would go on bankrupt without doubt.

Also, when mechanic system is applied, the productivity will definitely increase in this modernized world. Everybody knows that machine can produce more and faster than the human beings do.

Speaking of productivity, output increases when minimum wage increases.

With increase of minimum wage from RM 3.23 to RM 4.33, specifically with decent minim wage, workers are motivated. The higher minimum wage a worker gets the higher possibilities of buying households and the needs, therefore, the more motivated workers will be. And this will result in increasing the productivity of the firm from 200 units to 250 units.

However, is minimum wage RM 900 considered as decent minimum wage and can it motivate people?  

In my opinion RM 900 is very insufficient for local people to live in Malaysia when basic human needs such as renting shelter, food, clothes, transportation and communications are not cheap in price.

According to the survey, for monthly expense, one Malaysian needs at least RM 400+ for renting house, RM 125 to RM 150+ for lunch during weekdays (RM 5-6 per day), RM 150+ for utilities expense (including water, electricity, gas, phone etc.), RM 150+ for groceries, RM 150 to RM 200+ for miscellaneous or households, RM 150+ for public transportation and so on.

If I total up above figure, it is more than RM 1000 which exceeds RM 900. In addition, this was calculated for a person. If this person has children, how would they survive?

This indicates minimum wages that government implemented cannot support the basic living expenses.

As a matter of fact, a worker cannot be motivated with this minimum wage and an unmotivated worker won’t be working but still feels safe to receive fixed salary. Then productivity will decrease. No motivation, no work, no productivity.

As far as I am concerned, government should implement suitable amount of minimum wage above RM 1000, for workers to be motivated to produce more and also for them to have better life in Malaysia. 

Reduced Sugar Subsidy

INTRODUCTION

In this article “Sugar Subsidy Reduced For People Good’s”,is based on  <<http://www.nst.com.my/latest/sugar-subsidy-reduced-for-people-s-good-1.151472#>>our Prime Minister Datuk Seri Najib Razak announced that, the sugar price will increase RM0.20 due to reduction of sugar’s subsidy .The reason why the government has to reduce the sugar’s subsidy is because there are 2.6 million people in our country are having  diabetes. However, our prime ,Minister hopes that the community of business will not burden the people due to the increasing price of sugar.

Does Sugar Subsidy Effect Consumption Of Sugar ?

When the subsidy is reduced and the price goes up , people will consume less sugar and practice a healthy lifestyle including eating a healthy diet ,’’says Domestic Trade , Cooperatives and Consumerism Deputy Minister,Datuk Tan Lian Hoe .From my perspective, I absolutely agreed this statement .For example , usually people are putting 2 small teaspoon of sugar in a cup of sugar , but after the reducing sugar subsidy people will put 1 teaspoon of sugar  .Besides that ,there are 2.6 million of Malaysian are having diabetic , the number of it are slightly increasing .By preventing this , reducing sugar subsidy is a best and smart way to reducing number of people are having diabetes.

Effect Of Reduction Subsidy Of Sugar 

The above graph has shown the effect of the reduction of subsidy on the sugar price. The demand curve is slopping downward while the firm supply curve is shifting to the left. It is from S1 to S2. This demonstrates the consequence of the reduction of the sugar production. When the production quantity is reduced, the market equilibrium price will be still increasing as the reason of the demand more than the supply. Besides that, the reduction of subsidy given to the sugar manufactures will contribute to the increase of the production cost. The manufactures need to spend more money on producing the same quantity of sugar compared to last time. By that, the equilibrium price will increase from P1 to P2, the quantity demanded  is contracted from Q1 to Q2.

 Relationship Between  the price of sugar and Quantity  Demand Of Sugar

In my opinon ,sugar price is under the price elasticity demand. So, the demand curve of price elasticity demand is relatively steep and the value is 0 <PED< 1.Price elasticity of demand is a units of free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. As we know sugar is necessity goods for all individual, so there a large proportion of individual’s income that spent on sugar. People will face he difficulty on paying more as the price of sugar increase. Therefore ,sugar having an inelastic price elasticity of demand. When demand is inelastic, the percentage of the quantity demand is less than the percentage change in price with the price elastic less than 1 in an absolute value. Besides that , there are some factors that determining the Sugar is a price elasticity demand in inelastic demand . . It indicates that when the government reducing the RM0.20 of sugar’s subsidy, it will not affect the demand of sugar because sugar is an inelastic goods .So, from the graph, we can clearly defined there is a downward sloping of the demand  curve.Percentage of people income spend on the goods is one of the common factors.For example , of whatever people income is increasing or decreasing , they still need to buy the same amount sugar as before .They will not buy a large proportion of sugar when they income is increasing .So , sugar is an inelastic demand in price elasticity demand.

 Price Ceiling Of Sugar 

As we know sugar is under the price ceiling which means that government has set a regulation that the price of sugar not allowed to rise above a certain level . Government feels that the market price is too high and they have to control the charges that the sellers pass to consumers. From the graph, we can clearly defined that the reducing the subsidy of sugar will causing the supply curve from S0 shift to S1. However, there will be an excess demand of the sugar because QD is bigger than QS. This will cause the sugar shortage and forcing the price of sugar increase.Therefore, the government will set a price of sugar that is lower than the equilibrium price to avoid the situation such as black market to happen. Seller can charge any price of up to price ceiling but not allow to go above it. By setting the price ceiling, the poor people or people who are having lower income can afford to buy sugar. We can clearly see there is a shortage from the graph. The maximum price will encouraging consumer to consume more sugar but discouraging the producers to produce sugar because the profit gained by the producers decrease .When the shortage is occur, the good may be allocated in unfair way for instance ,first come first serve. To distribute the sugar more fairly, government adopt a system that let everyone get the chance to enjoy the limited goods.

Monopoly In Sugar Industry

 MSM Malaysia Holdings Berhad (MSM) is the one of the sugar manufacturing company in our country .This means the sugar manufacturing industry in our country is under the monopoly system .Firm is a price taker but cannot charge price sugar  that consumer will not bear it.So , in the monopoly graph ,the total revenue is starts from  the origin ,average revenue is downward sloping ,and marginal revenue is downward sloping too .This is because the monopolist can either control the price of sugar or output of sugar .Besides that , sugar industry are barriers to entry into the monopoly industry ,so economic profits of sugar can persist in the long run.In the long run, sugar industry (MSM Malaysia Holdings Berhad) will be earning the supernormal profit because there is no competition of it and more importantly because of the assumption “barriers to entry ‘’.

Price Of Sugar

Summary

20 sen more for sugar

http://thestar.com.my/news/story.asp?file=/2011/5/10/nation/8649957&sec=nation

http://www.themalaysianinsider.com/malaysia/article/sugar-price-up-20-sen-tomorrow

From the articles, it tells us that the prices of sugar will be increased by 20 sen to RM2.30 per kilo today, said Domestic Trade, Cooperatives and Consumerism Ministry. There are a hike on the price of sugar because Malaysia government reducing subsidy of sugar.

Opinion

Sugar is goods that most of the human being need in their daily life.

There are some factors affect changes in demand. One of the factors is expected future price. If consumers can actually expected the future price of a good, they will protect their own benefit and purchase more good than previously they bought before the rises of the good. Thus, the demand of the good will be increases before the period. For example, when the consumers expected the price of sugar will be increases tomorrow, they will purchase more sugar to keep first before the price of sugar increases tomorrow. So, the demand of sugar for today increases.

When the price is increasing and the quantity demanded is decreasing, there will be more suppliers and cause a rises at quantity supplied. This concept is actually referring to the Law of supply. Law of supply means that suppliers are more willing to offer more products for sale at a higher price instead of at a lower price. It also stated that those suppliers will try to increase productions in that period to increase their profits. For example, when the price of sugar is increasing, the quantity demanded will be decreasing while the quantity supplied will be increasing as well.

The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. There are three types of elastic demands which are perfectly inelastic demand, unit elastic demand and inelastic demand. The demand for most food is inelastic demand. Inelastic is a given % change in price results in a smaller % change in quantity demanded.  The elasticity coefficient is greater than 0 but less than 1. For example, the changes of price of sugar is inelastic to consumers because most of the people usually spend a very small proportion of income, have an almost zero elastic demand.

There are factors that explain why sugar is inelastic demand. First of all, complementary goods. Complementary goods such as sugar tend to be inelastic. For example, if the price of sugar rises, the demand for coffee will be decreases. The demand curve for coffee shifts leftward. It is a negative relationship between price of sugar and the demand for coffee because they need each other at the same time. 

There are some other factors affect elasticity such as the closeness of substitutes, the proportion of income spent on good and the time elapsed since the price changed. First of all, the closeness of substitutes. Sugar is necessities goods and it has weak substitutes so it consider as inelastic demand. Next, the proportion of income spent on good. We spent a very small proportion of income on sugar every day. Thus, sugar is inelastic demand. Lastly, time elapsed since price change. The elasticity of demand depends on whether the value of sugar can stay for a long period of time. In this case, sugar is inelastic, therefore its elasticity of demand is greater. For example, at a longer period of time, consumers will find a substitute for sugar as they have no choice on the price that has been set.

When the price of sugar is higher, the quantity supplied will be higher as well because supplier can earn more profit while the quantity demanded will be lower. Thus, it will cause a surplus in the graph. A surplus is a situation where there is an excess at some price of quantity supplied over quantity demanded.  On a supply and demand curve a surplus is represented by points above the equilibrium price.  When a surplus exists buyers have an oversupply of product to choose from and will probably pay less for goods and services.  For sellers, they are competing with other suppliers for customers and their prices will fall, as will their sales.

Based on the article, the price of sugar goes up due to Malaysia Government reducing the subsidy of sugar. Subsidy is a payments made by the government to producers, decrease the prices paid by buyers and increase the prices received by sellers. There are the effects of a subsidy, such as a fall in price and increase in quantity supplied. The subsidy lowers the price of sugar and increases the quantity supplied of sugar. Besides, payments by government to supplier. The government pays a subsidy to sugar suppliers on each tons of sugar. For example, suppliers increase their supply of sugar to 60 million tons a year and receive a subsidy of $20 a ton. Suppliers receive payments from the government.

Lastly, government is using the concept of price ceiling to control the market of sugar. Based on the graph below, price ceiling is the price that government set below the equilibrium price. There are few reasons of government applied price ceiling to a sugar market. First of all, to prevent black market. Black market is an illegal market in which the equilibrium price exceeds the price ceiling. For example, some suppliers might sell their products with the price that higher than the government set to the buyers.

Housing Price Increase

Introduction  

According to the article “House Price Hike Likely”,<< http://biz.thestar.com.my/news/story.asp?file=/2012/8/17/business/11870222&sec=business>>the housing developer had announced that the selling price of the properties in Pulau Pinang will be increasing in near future. In my opinion, this is caused by several reasons such as the increment price of materials such as cement and sand that is needed in building and also the cost of labor and transportation needed in developing that has been increased. Details of the increment are stated as follows.

( i ) Price of Cement

According to the announcement from Lararge Malayan Cement, the price of cement for 50kg per bag had increased from the price of RM16.50 to RM17.50. As 60 percent to 80 percent of the materials used in building a building have included comprised cement and other cement related materials, it has been told by the Penang Master Builders & Building Material Dealer Association that increment price of cement would have a significant impact towards the property price and also to other manufacturers who need to use cement as one of the material in their product such as concrete and bricks. Even though the increasing price of cement is affecting the price of the properties in Pulau Pinang, but it does not affect the properties in Sabah and Sarawak

( ii ) Price of Sand

Besides the price of cement, price of other materials such as sand had also been increasing .There are facts stated that the price of sand had increased from RM40 to RM43 per yard. If it is compared to the earlier year, the aggregate price per ton had increased from RM20 to RM21.

In the mean time,  price of cement and sand, cost of labor and transportation charges had also been increased in this year. It was found that the wages of the labor had increased from RM35 per day to RM45 per day in this year. This is due to large shortage caused by many of the foreign workers such as the Indonesians that need to go back to their country and to cover up the shortage; wages have been increased to retain them here.

( Iii ) Cost Of Labour And Transportation

Besides, transportation charges for sand have increased from RM400 per truck load increase to RM450 per truck at the same time.

So by using the assistant of graphs, I will be explaining the increasing price of properties in Pulau Pinang that has been affected by the cost of cement, labor and the cost of transportation fees and ways to reduce the price in my opinion using the economic theory learnt.

How The Price Of Production Cost Affect The Price Of Buildings ?

One of the factors that will cause decrease in supply will be the increment in cost of production. Therefore, the supply of buildings from the developers had decreased by shifting the supply curve inwards from S0 to S1 when the price of cement, sand, labor and transportation increases. The quantity of the buildings developed was at Q0 when the price is at P0. But when the supply curve had shifted to S1, to meet the equilibrium point at E1, the quantity of supply had decreased from Q0 to Q1 which cause to price to increase from P0 to P1 to avoid any shortage in the market.

We could understand more that there is a relationship within the cost of production and the quantity supply of buildings in the market that would cause the price of buildings to be increased if the cost of production increases.

Ways to help in reducing the price of buildings using economic theory

( i ) Imposed subsidies

The graph above shows the effect when government has imposed subsidy into the cost of production. The subsidy encourages the developers / suppliers to develop more quantity of buildings when the price of the production cost has reduced from P0 to P1. It is clearly shown above that the supply curve had shifted outwards from S0 to S1 when the subsidy is imposed due to the reduction of production cost. Shifting outward of supply curve means that the quantity of buildings in the market has actually been increased from Q0 to Q1 when the subsidy is imposed.

The shift of supply curve from S0 to S1 has caused the quantity of supply to be increased from Q0 to Q1. Price of buildings will decreased from P0 to P1 when there is more quantity of buildings in the market.

From both of the graphs we could understand that if government would give subsidies to the suppliers to reduce their burden in developing the buildings, the quantity of buildings will be increased in the market that will cause the price of buildings to be decreased.

( ii ) Imposed price ceiling on cost of production

Price ceiling is a maximum price of an item set by the government. It is always set below the equilibrium point. The government would impose the price ceiling whenever they think that the price at the equilibrium point (E) is too high. Therefore, the price of production cost (materials, labor and transportation) is not allowed to rise above the price ceiling when it has been imposed by the government by the supplier or any other person unless there is a change by the government.

The suppliers will produce at Qs when price ceiling is imposed and while the demand will be at Qd which cause shortage of materials, labor and transportation in the market. The shortage may be replaced by importing it from overseas that sells at a cheaper price.

Lesser cost in production will cause the supply curve to shift outwards from S0 to S1 as one of the factors that affect the supply is the cost of production. Less in production cost would cause the supply to increase from Q0 to Q1. Price of building would decrease from P0 to P1 when the quantity of buildings developed increase in market.

Relationship within the production cost and the demand on buildings

Lesser cost in production will cause the supply curve to shift outwards from S0 to S1 as one of the factors that affect the supply is the cost of production. Less in production cost would cause the supply to increase from Q0 to Q1. Price of building would decrease from P0 to P1 when the quantity of buildings developed increase in market.

Relationship within the production cost and the demand on buildings

In my opinion, there is zero relationship within the price of production cost and the quantity demand of buildings. As there are many people who wish to purchase properties as investments, the price of building will not be a “problem” anymore towards the buyers. And therefore, there is no change of demand and also no shift in demand curve when the price of building changes.

Conclusion

In short, the price rise of buildings is due to the rise in cost of production. In order to reduce the price of buildings, in my opinion, several methods can be used with the help by government such as imposing the subsidies upon the cost of production to reduce the burden of production or impose the price ceiling for the suppliers to use the production cost at a lower price. Through these methods, many buildings can be developed by the developer and therefore help in reducing the price of buildings.

Reducing of price in buildings will help the poor to have more ability to purchase their own property or even help people to have a cheaper rent to stay in.

Cigarettes Price Increase!

BAT Malaysia announces cigarette price increase of 20sen from Monday

http://thestar.com.my/news/story.asp?file=/2012/10/21/nation/20121021213418&sec=nation

http://www.havocscope.com/cigarettes-sold-on-the-black-market-in-malaysia/

Summary

From the article, it tells us that there is a hike on price of cigarette. According to British American Tobacco Malaysia (BAT Malaysia) has announced that there are a 20sen increase on the prices of all cigarette packs and it will be effective soon.  Based on William Toh which is the managing director of BAT Malaysia, the changes of price on cigarette is because of the excise and sales tax payable has increased.

Opinion

The world’s view nowadays on smoking cigarettes has changed dramatically over the last century. This habit considered to be cool or sexy for the generations nowadays. Many people are widely enjoyed on smoking cigarettes. Although smoking is also considered to be a nasty addictive habit that can kill, but smokers still increasing year by year.

In my opinion, the article approve to the concept of Law of demand. Law of demand is the quantity demanded will change when the price is changing and other factors are all remain unchanged. As the price of cigarette is rising, the quantity demanded of cigarette is decreasing because the willingness for people to purchase it more is has decreased and also because people might not be able to afford. It is an inverse relationship between price and quantity demanded. Based on the graph below, smokers are not willing to purchase more cigarettes had decreased. Thus, the quantity demanded of cigarettes had decreased. Other than that, suppliers are more willing to supply more cigarettes when the price is higher because suppliers can earn more profit from it. So, quantity supplied of cigarettes increases.

 Besides that, complements goods of cigarettes will also affected by the changing of price on cigarettes. The complements goods of cigarettes which is lighter will decreases if the price of cigarettes increases. Thus, people wouldn’t buy lighter as if they don’t have cigarettes. When the quantity demanded of cigarettes goes down, there will be a substitute effect and income effect. Smokers find other goods such as Tobacco plant to satisfy their wants.  Tobacco plant is the replacement goods for cigarettes. Other than that, income effect is when the price of cigarettes increases but smoker’s income remains unchanged, smokers might not be able to afford to purchase as much as they bought previously. Smokers will decrease the amount they bought previously and cause the quantity demanded of cigarettes decreases.

            If the expected future price of cigarettes increases, the smokers will protect their benefit by purchase more on cigarettes while suppliers will produce lesser on cigarettes. Thus, the demand on cigarettes increases while the supply on cigarettes decreases. There will be changes in demand and supply. In the other words, the demand or supply curve would either shift to the left or right influenced by the factors. For example, if suppliers of cigarettes can expect the future price of cigarettes will be increase, the supply curve will shift to leftward because there is a decrease in supply while the demand curve will shift to rightward because there is an increase in demand.

Other than that, this situation is in price elasticity of demand. Price elasticity of demand occurs when the percentage change in the quantity demanded is less than the percentage change in the price. There are few factors that influence the elasticity of demand. First of all, the closeness of substitutes. The closer the substitute for a good or service, the more elastic is the demand for it. It means the closeness of substitutes for cigarettes will affect the price elasticity of demand curve. For example, the smokers that cannot afford to purchase cigarettes as the price goes up can purchase tobacco to replace the cigarette. The income effect will not affect the elasticity of demand curve of cigarettes because smokers are willing to purchase cigarettes. Thus, the quantity demanded of cigarettes will not be affect too much.

            As the price of cigarettes goes up, the suppliers will produce more and the smokers will purchase lesser. It means that the supply goes up while the demand goes down as what I mentioned. Thus, it will cause the market failure and deadweight loss will rise. Market failure is the markets do not always achieve an efficient outcome. Back to the article, the suppliers will produce more cigarettes and it might cause a market failure in cigarettes market. Overproduction of cigarettes and the selling rate is not that fast cause a surplus. Therefore, the suppliers of cigarettes will lose profit.

            In conclusion, the government is using the concept of price floor to control the market. Cigarettes harm human’s health and bring so much disadvantage to us, so government always wanted to control the people to smoke lesser. When the government set the price floor, sellers will not sell it lower than the price floor, because it is illegal. It means that the price of cigarettes will be pull up by government and the quantity demanded for it will be decreases. There might be some smokers cannot afford to buy as much as they bought previously, so it causes a fall on quantity demanded of cigarettes. Although government did pay attention in the pricing of cigarettes, but black market still occurs. In 2010 and 2011, the rate of cigarettes sold on the black market in Malaysia was estimated to be at 36.6 percent of all cigarettes sold. The illegal arrangement is made between buyer and sellers. Thus, government can really get to control the market when the black market occurs in Malaysia.

Economic Anti-Smoking Campaigns

Based from the news article <Norfolk Pension Fund tobacco investment to continue> from BBC News
http://www.bbc.co.uk/news/uk-england-norfolk-19717121
mention about how the use economic to support anti-smoking campaigns.

         Every business man’s target and first purpose is money, and most of them do not care about environment and bad effect will bring out to the other people in future. When they want to earn more and more money, they will not care bad way or good way to get the money. Tobacco is the one of example.

         According to the report in Cumbria, there are more than 1100 children aged between 10 and 14, 5% are regular smokers. And they find out most of the children are smoke under peer pressure. They smoke is because of the people around them also smoking. When they want to join them, mean they also need to smoke if not they will be kick out of the “circle”.

            In China, smoking is their daily habit, and there are at least 300 million smokers in China. According to the account report, there is about 40% of global production and consumption tobacco in China. We can see that China is the biggest producer and consumer in tobacco and for the people who smoke the cigarette become inelasticity, because the cigarette in China is quite cheap and they can produce they self. Cigarette can earn money also can kill people, 300 million smokers in China, and at least 1 million people death from smoking-related diseases for every year.

            We know that smoke is did not classification to any people, anyone can smoke, either children or old people. So this show the demand is big enough to let business man for earning money. But cigarette is not good in health and may be ban from government, so they paid the high tax to the government in every country.

They paid the tax have many advantage to the cigarette seller, first is to control the economics of the country. When they paid the high tax, they already hander the money flow of the country and the government also need their tax to maintain their own country, and also can let government not easily to say the cigarette cannot come in to their country or to stop the cigarette come in.

            Second is to make their unhealthy cigarette become legal, when the cigarette become legal, than they can sell it in any shop and making advertisement to let more people buy it. After that they no need to care too much, because they are selling cigarette, when a people start to smoke, he or she will hard to stop and they will not care about the price to buy the cigarette. Cigarette is same like drug, and just slightly better that drug only. This is a long run business, because when they start selling cigarette, it will not easily to stop and the longer period they sell the more money they earn and will making more problem to the country.

            However, the cigarettes become legal. But the tax is too high to some of the greedy seller so they try to escape the tax from government, and that become illegal cigarettes. Cigarette is bad but can earn more money and faster, so when the run from the government tax they sell the cigarette to the same market price, they earn more than the seller with paying tax. Not only illegal cigarette, there are also have illegal cigarette factory. In India, they hired the girls to help them make tobacco; they call them “tobacco girls”. They live in a poor place, so they can just hire them with low salary and the labor are not fixed in any age. They need to work between 10 to 14 hours a day and they must roll at least 1000 beedis each to earn a paltry sum of less than $2. The salary is paid by the middleman.

            

            The chart above show on year 2005, the smoker is lower than few years before, so we can do something to make the people who smoke become lower.

            The cigarette is become legal, than the only way to stop people to smoke is from the education and the mind of how the people they think about smoke. Now, there are starts to having many activities to stop cigarette. The people in Northern Ireland vote to ban the tobacco advertising and promotion in their country. In Australia, they planning to have the cigarette law are to make the package of the cigarette with no brand and write the word of bad effect after smoke on the package. There also have a activity in 2012 October in Isle, this is to let the smokers sigh up to quit smoking in 28 days, they also call this month is “Stoptober”, is more like “Stop Tobacco October”. In Swiss, they fully reject and ban the people smoking in public spaces; we can see how the Swiss people care about their health.

            The purpose of making less people to smoke is to let the demand go down (D1 to D2). When the demand goes down mean less people buy cigarette, than the producer will also decrease their number of product (S1 to S2). After that the equilibrium point will from point A more to Point B. When this graph achieve in every country, there will be less and less people smoke.

The most important is from education, we must let the children know how bad the cigarette is and teach them how to face with the peer pressure problem. When the demand become lower and lower, the tobacco seller will also hard to sell tobacco any more, than we will have a good and clean environment to live.