The minimum wage is set in Rm900 which announced by Prime Minister Datuk Seri Najib Tun Razak

(http://thestar.com.my/news/story.asp?file=/2012/4/30/nation/20120430211402&sec=nation)

In the beginning of the year, April 2012, Prime Minister Datuk Seri Najib Tun Razak had announced that the minimum wage rate in Malaysia for the private sector employees in Peninsular is set as RM 900 and RM 800 in Sabah, Sarawak and Labuan. However, this announcement was followed by some dissatisfaction from Malaysia labours as they claimed that RM 900 is not enough to cover their cost of living around Kuala Lumpur area. I personally think that having a minimum wage rate is a good commandment made by the government as it can avoid or to minimize the discrimination of labour especially unskilled labour. They might be fulfilling on the wages and work better.

From the economics point of view, setting a minimum wage is like setting a price floor. Price floor is a tool used by government to set minimum prices for goods and services that is believe sold in an unfair market at a very low price. In this case, we use the minimum wage in Peninsular, the price floor is RM 900 which means that employers are not allowed to pay their employees at any wages below the RM 900. A price floor must be set above the equilibrium price to be effective. Diagram 1 is drawn in order to have a clearer picture on the impact of the minimum wages on the number of labours.

As you can see in the Diagram 1, before the minimum wage is set, the equilibrium wage is RM800 and equilibrium number of labours is 10, 000 which is showed at point E. At this point E, the number of labours that are willing to supply is equal to the number of labours that are demanded by the firms; therefore, there is no surplus or shortage occurred. After the minimum wage rate is set at RM 900, the number of labour supply increases from 10,000 to 12,000 labours and due to the increase of wage rate, the supply curve moves along from point E to point B. On the other side, the labour demand decreases from 10,000 to 8,000 due to the increase of wages. A surplus of labour is occurred at the gap of point A and point B which is 4,000 labours and this will lead to unemployment rate to increase due to the lesser labours demanded by firms and more labours supplied by the people. However, this does not imply that the commandment is bad for the economy. In the Diagram 1, a deadweight loss is occurred due to the regulations of minimum wages that moves the market away from the equilibrium point as shown in the purple shaded region; this region is the amount of money that the labour market loss. Besides that, producer surplus (blue +orange) is more than consumer surplus (pink) which means that the labour get more benefits than the firm. Not only that, by setting a minimum wage above equilibrium might be able to increase the productivity of labours because of the motivation and satisfaction inside them. In brief, I believe that implementing minimum wage is good for the economy growth.

            Furthermore, we will now relate the minimum wages with the elasticity of demand and supply of labours. It is believed that low-skilled jobs are more elastic as compared to job that requires specific skills and trainings because there are more labours that are readily available for the job at a lower market wage rate. If the elasticity of demand for labour is elastic then any changes in wage rate will results a more changes in labour demanded and vice versa. As an illustration, if both the elasticity of demand and supply of labours are elastic in response to the changes in the wage rate then the excess supply will definitely be more than the surplus in Diagram 1. Hence, it is important to understand the elasticity of goods and services because it enables us to know the responsiveness of demand and supply towards the changes in price in a given time period. The government should be organizing a campaign that able to encourage them to learn and train their skills in technical schools.

          Next, we will discuss on the income and substitution effects that arise from the changes in the wage rate paid to the employees. As for income effect, an increase in the wage will results a higher income of a particular person that could earn from the job; in other perspective, it also mean that the time needed by the person to spent at work to earn sufficient pay for the job decreases. To sum it up, a higher wage rates means that the target wages can be achieved with fewer hours of labour supply; hence, income effects encourage people to work less hours and enjoy more leisure times as leisure is considered as a normal good. On the other hand, for substitution effect, an increase in the wage will definitely increase the cost of production. After that, the firm will consider whether to use more capital than labour as labour become more expensive and maybe they can also substitute their labours with unskilled labours or foreign labours that are employable at a lower wage rate.

          All in all, the policy of minimum wages set by the government is good as it ensure that unskilled labours are protected from discrimination and it also acknowledge the labours on the rate of wage they should get; thus, it helps to eliminate some of the microeconomics failures of labour market. There would be slightly increase of their purchasing power, so it will be slightly lead the economy become well. Besides, having a minimum wage rate of RM 900 in Malaysia is not enough to bear the high cost of living in the country; but if the minimum wage is set too high then it will mislead the labour market and eventually will affects the economy of the country which shows an increase of unemployment rate. The purchase power would be also decrease since there are lots of employees are unemployed. Hence, the policy is good as it ensures that the implementation does not burden the employers and also the employees will gain benefits from it.

Crude palm oil prices may fall nearly 7% in the last quarter of 2012

(http://in.reuters.com/article/2012/09/22/india-oils-prices-idINL4E8KM03F20120922)
Malaysia crude palm oil (CPO) prices may fall nearly 7 percent to 2575 ringgit per ton in the last quarter of 2012. Malaysia and Indonesia control almost 90 percent of the palm oil market which Malaysia was a leading producer and next is Indonesia. The competition has heated up since Indonesia changed its palm oil export duty structure.

            Palm oil mill is market structures of monopolistic due to the product differentiation enable the mills to compete. Their product can be differentiating in three areas which are quality, price and marketing. There is large number of firms to compete and free to enter and exit the industry. So, these firms are unable to make an economic profit in the long run and the demand of their product is downward sloping. Each of them are supplies a small part of the total industry and they must be sensitive to the average market price of their product. Since the price of the crude palm oil may fall in last quarter of 2012 and this market structure doesn’t make economic profit in long run, so there might be an amount of firms quitting.

            Assume that if the prices of crude palm oil drop 7% as the Reuters’s report, the quantity demanded for the crude palm oil will be increase. As the law of demand, the lower the price of a good, there will be the larger of quantity demanded. So, there will be an increase of quantity demanded for crude palm oil. Besides, soya bean oil is one of the substitutions of the crude palm oil. According to the Index Mundi which reporting daily prices of the soya bean oil, the price at 29 September is around 3482.07 ringgit per metric ton. This shows that the price of the substitution soya bean oil is higher than the crude palm oil. Hence, there will be no substitution effect on crude palm oil. People will seek the substitutes for a lower price and the price of crude palm oil may fall in last quarter of 2012, so the quantity demanded of the crude palm oil will be increasing. People can afford this product more than previously.

As the diagram 1 shows the demand curve of the crude palm oil. When the prices rises to 100 ringgit, the quantity demanded will be decrease into 40 ton. But when the price of crude palm oil decrease to 50 ringgit, the quantity demanded is increase into 90 ton. This curve shows the willingness and ability to pay of the consumers.

            As for the supply of the crude palm oil from a mill if the price of the crude palm oil falls, the amount will be decreased. The law of supply state that the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied. The quantity supplied of a good is the amount that producers plan to sell during a given time period at a particular price. 

           As you can see through the diagram 3, it shows the supply curve of the crude palm oil. This diagram also represents the entire relationship between the price of a good and the quantity supplied; other things remain the same like resource, number of supplier and technologies. For example, at a price of $70, amount of 30 ton supplied. When the price of crude palm oil is $100, 60 ton of crude palm oil is supplied. The supply curve slope upward; as the price of crude palm oil increase, the quantity supplied increase. Through the diagram show us that in the last quarter of 2012, the quantity supply of crude palm oil will decrease.

            According to Dr Ahmad Ibrahim, the CEO of the Academy of Sciences Malaysia says that export tax of crude palm oil had been decrease from 25 percent to 22.5 percent. The cost of production also will be decrease since the tax had been decreased. With the small duty reduction in crude palm oil will bring this product continue to remain relatively more expensive and less competitive to export the product. Besides, this will encourage larger local sales of crude palm oil to domestic refiners. With the decreasing of the export tax, in the quantity demanded and quantity supplied from the crude palm oil mill will be increase.

            In a nutshell, we assuming that the price of the crude palm oil may be decrease in the last quarter of 2012, there will be a number of firm might quit because they might cannot gain any economic profit in that firm. Besides that, they must be very sensitive to the price of crude palm oil because this firm has a lot of competitors and the competitions between them are very fierce. Next, through the price may be decrease, the quantity demanded of the crude palm oil will be increase because the consumers have higher purchase power than previous since the price become lower. On the other hand, the crude oil palm mill will be decreasing their supply because through the price falls had decreased their profit of selling tons of crude palm oil. Furthermore, with the decrease of export tax, there will be more and more supply from the crude palm oil mill. This is because the cost of product will become lower and gain higher profit. I believe that if the Malaysia government and Indonesian government step up cooperation to implement the stabilize price, so it will be effectively stabilize the price because the combination of two country is about 90 percent of global palm oil. Through the cooperation, the price can be stabilize and maintain in a high profit for every palm oil mills.

Demand and supply and the market of hybrid cars due to the increase price of petrol

Article 1

(http://malaysia-today.net/index.php?option=com_content&view=article&id=30301:petrol-price-expected-to-increase-by-10sen&catid=19:newscommentaries&Itemid=100131)

The article stated that RON95 current price is RM1.80 per litre, RON97 current price is RM2.05 per litre and diesel is RM1.70 per litre. In the Fast Motoring article the 1Malaysia government is expected to adjust the fuel price of RON95 to RM1.90 and RM1.80 for diesel along with the new fuel price mechanism which will be revealed in the mid-March. The price of RON97 will also be increased but there is no decision yet with the government. The government believed that increase of 10sen is acceptable to all automotive users.

Petrol is a complementary good, one that is used with another good such as cars. An easiest way to understand complementary good is that if the price of the petrol is decreased, the demand of an SUV car will increase. SUV cars have high consumption on petrol. Even though SUV cars petrol consumption is higher than normal cars the price of petrol is still lower where consumers can afford to pay for it and also afford a SUV car. In economics we define goods as substitute goods as if the increase in the price price of a good increases and the demand of another good which could replace it increases which is cheaper.

 The total effect of a price change is actually combined of two different effects, the income effect and substitution effect. Income effect is when the price of a good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded of the good or service decreases. An example of income effect is that if the price of petrol increases, everyone’s income is still the same. People will feel poorer and couldn’t afford the new price of the petrol. This would make them change to scooters and motorcycle which consume less petrol. Next is substitution effect, an example for its explanation is that the prices of the petrol increases but the salary of automotive users still maintains the same, so they will find a substitute good to replace it. They will substitute to a good that will allow them to consume as little petrol as possible.  An example is that the demand of bicycles, motorcycles and hybrid cars will increase because petrol is not needed much.

As above, cars and petrol are complements. A Toyota Prius which is a hybrid car does not fall into the oil complement category because it uses another type of energy source with is electrical motor and it only uses a small amount of petrol. They will also other fuel efficient vehicles that could substitute. Hybrid car are gasoline engine run car combined with the power of electric motor. Petrol prices increases and the demand for these categories of cars increases. SUV’s are fully petrol consume cars, SUV’s and hybrids are substitutes. When one is in high demand the other products demand usually decreases.

  Now these are the definition of the law of demand and the law of supply. The law of demand is that the price and quantity demanded move in opposite directions. A decrease in price will lead to an increase in quantity demanded. An increase in price causes quantity demanded to fall. When this relationship between price and quantity demanded is graphed, it is called the demand curve. There are 6 main factors that would change the demand. The 6 factors are the prices of related goods, expected further price, Income, expected future income and credit, population and preference. The law of supply is the direct relationship between supply price and the quantity supplied, assuming ceteris paribus factors are held constant. This economic principle indicates that an increase in the price of a commodity results in an increase in the quantity of the commodity that sellers are willing and able to sell in a given period of time, if other factors are held constant. The law of supply is an important principle in the study of economics. There is 6 factors that can change the supply of a good. The 6 factors are the prices of factors of production, the prices of related good produced, expected future price, the number of suppliers, technology and the state of nature.

In diagram 1 as price of petrol increases, the demand of the hybrid car in the market increases as well. When demand increases the demand curve in diagram 1 will move upwards from A to B. In diagram 2 it shows that if the price of petrol decreases, the demand of hybrid car will also decrease. It is because people could afford to pay for the petrol and buy a fully petroleum car to use. There was no increase in supply because it is harder for the producers of the hybrid car to supply more because the supply curve is very inelastic. So as the price of petrol decreases so does the demand of hybrid cars to sustain normal cars.

In my opinion and studies, there are lots of substitute goods such as motorcycle and hybrid cars, but not all Malaysian will choose a neither motorcycle nor hybrid cars. When the price of fuel increases, there will be less driving and people will start to go for public transport such as buses, LRT, monorail and etc. Not all Malaysian could afford to buy a hybrid car. Majority will go for public transport but middle class family which could afford a hybrid car would obviously go for a hybrid car. Hybrid cars are still considered as luxuries cars and not low cost cars. It is because hybrid cars are still expensive and production is not as much as fully petroleum cars. For example Toyota have PRIUS and Honda have INSIGHT and CIVIC. Both brand of hybrid cars are not cheap as the cheapest 1 is Honda Insight and it cost a RM98,000 and the maintenance is very high as the technology is still new in the market.

Tax increase on cigarettes

Article 2

http://thestar.com.my/news/story.asp?file=/2012/9/14/focus/12024429&sec=focus

The Malaysian government may raise the tobacco taxes in Malaysia in order to discourage smoking to Malaysian adolescents. According to Maybank Investment Bank Bhd, they are to cut its budget deficit. But by increasing the tax of tobacco concerns over the serious illegal cigarettes trade in the country. Based on 2012 studies, the incidence of illegal cigarettes has dropped from 39%(which is 2 year ago) to 34% now. This trend is a result of the government having a strong enforcement and not increasing tax last year. In 2004, the government increases a high amount of tax on cigarettes which leads a 30% drop in the legalize industry volume. However the Global Adult Tobacco Survey (GATS) by the world health organisation said that the number of smokers in Malaysia is still the same. This explained that the smokers have switched to illegal tobacco cigarettes. One of the articles also said that the World Bank is recommending the tax to be at least 65% but in Malaysia it is only 45%. Legal tobacco cigarettes have been made less affordable in Malaysia. It is the illegal cigarettes remained unchanged in price over the last 10 years.

In economic term, tax incidence is the division of the burden of a tax between buyer and sellers. When an item is taxed by the government, the price might rise to full amount of the tax, by a lesser amount or even not at all. If the price increases by full amount, the buyers pay the tax. If the tax increases lesser amount then the tax, the seller and buyer share the burden on paying the tax and if the price maintains the same, the sellers pay all the tax. In this case, the buyers pay the full amount of tax on the cigarettes. If we raise the tax on cigarettes, the tobacco companies will just pass all the tax to the consumer. This statement shows that the government decides who to burden the taxes on. They want to increase its tax in order to stop adolescence to stop smoking. In Malaysia, only the people who could not afford to buy cigarette will try to stop. There is a reading where consumers will just move to a cheaper brand of cigarettes or either move to illegal smuggle cigarettes. Imposing taxes have certain positive and negative influences in the economy. The influences are including smuggling of illegal cigarettes, might cause a problem for the poor, and less health problem. Increasing tobacco tax rates is a way to help boost the economy and generate health savings for country facing budget deficits. It will impact the poor because they will have to spend a higher amount of mother of their income for purchasing cigarettes.

This is related to elasticity of supply. Why is elasticity is includes in this? it is because it determines the distribution of the burden of taxes which is tax incidence. To understand the key of tax incidence is to realize the tax is not a tax on person. It is a tax on every transaction for example buying sugar, salt etc... Other than that, the price elasticity of demand will also decide the decrease of demand for cigarettes. The demand of cigarettes decreases will lead to reduces tax revenue.

 An example is that if there is a RM4 tax on cigarettes means there must be a difference between what the seller gets and what the consumer pays. It doesn’t really matter where the taxes goes. In this case the taxes are imposed to the buyers of the cigarettes. You were supposed to sell the cigarette pack at RM6 or even higher but with the RM4 tax added needed to pay, the price is too high for cigarette pack to be above RM10 so the cigarettes increases to RM10 only which effect the demand curve to move rightwards The graph bellow with show the result.

In the graph above, the gap between S1 and S2 is the amount of tax of RM 4. The tax results the quantity demanded on cigarettes to reduce from D1 to D2. The price of the cigarettes is also raised from P2 to P1. The producers will only receive the price at P2 and below where they have to pay the tax.

There are also Tax Incidence which would affect with elasticity of demand. The tax between buyers and sellers always depends on the elasticity’s of demand and supply. To see how it affects there are 2 cases where it would effect on it. 1^st is perfectly inelastic demand where buyers pay the entire tax. The second one is perfectly elastic demand where seller pay the entire tax to the government. The more inelastic in the demand, the gap for the buyers to share the tax of is bigger. Next is tax and efficiency. Without tax, marginal social benefits equals to marginal social cost whereby the market is efficient. But when marginal social benefit exceeds marginal social cost, the tax is inefficient. The total surplus of the market is also maximized. The tax revenue takes part of the total surplus. When the tax keeps on increasing, the tax decreases the quantity supplied, raises the buyers price which would reduce the demand and lowers the sellers price where they will have a least profit in it. The decreased in quantity supplied creates a deadweight loss too.

In conclusion, the government is trying to increase the tax of cigarettes so that the consumption of cigarettes will be lesser. By raising taxes will benefit the society because they will not be able to spend more money on cigarettes so people will smoke less or quit smoking. Although the tax if cigarettes increase does not mean that everyone’s demand may decrease. This may cause the poor to spend more of their income which made them poorer. They will also change to cheaper brand of cigarettes. This may cause smuggling activities and black market cigarettes will start to earn more money than before. The government should strengthen the law to catch the illegal activities of smuggling cigarettes.

Cigarettes prices: Higher taxes, fewer smokers

Article 2

Taxes

http://www.nst.com.my/opinion/letters-to-the-editor/cigarette-prices-higher-taxes-fewer-smokers-1.115730

  According to the article I have read, it is stated that the government should increase the price of cigarettes from RM10 where it is the current price to RM30 for a pack of cigarettes. Besides, it is known that this is one of an effective way to lower the consumption of cigarettes. In Malaysia, the price of cigarettes is known to be cheaper than many other countries that have anti-smoking measures. The price of a pack of cigarettes in Malaysia is considered low compared to countries such as Singapore and the United States. In year 2008, a study has been made and it was found that if taxes were to produce an increase in the price of cigarettes, the number of adult smokers in America would decrease. One of the reasons of imposing tax is to reduce the use of cigarettes in order to reduce health problems. It has shown effectiveness of the increase in the price of cigarettes that has reduced the consumption of cigarettes.

  From the article, we can see the importance of price elasticity of demand for determining the significance of tax on cigarettes. When tax is imposed, the price elasticity of demand will show the decrease in demand of cigarettes. Besides, it is known that the price elasticity of demand for cigarettes is inelastic which means that imposing tax that will increase the price will decrease the demand by a lower percentage. Furthermore, the price elasticity of demand is important for determining the tax and the impact caused to the economy. However, imposing taxes may have certain positive and negative influences on the economy. These influences may include smuggling, less health problems, and might cause a problem for the poor and young cigarette consumers. Since the price elasticity of demand for cigarettes is inelastic, it will cause an impact to the poor. If the taxes keep rising, this will result in the poor having a need to spend a higher amount of their income of purchasing cigarettes. Other than that, the price elasticity of demand will also decide the decrease in demand for cigarettes. A higher decrease in demand will lead to reduced tax revenue. The taxes include tax and value added on a product, profit taxes and income taxes that are imposed on employees. Therefore, the decline in demand that was caused by the increase of tax will lead to the government receiving less tax revenue. Furthermore, elasticity will also determine the employment rate in the economy. For example, when the tax has caused a decline in demand of cigarettes, the profits of the firms will most likely drop due to the quantity of cigarettes bought will be less. Therefore, firms will usually dismiss workers as the demand for cigarettes has decreased due to the tax imposed that has reduced their profit. And finally, it will link to workers producing too much tobacco and lead to a loss when there is less demand. This will result in unemployment of workers in the tobacco firms. However, if tobacco consumers reduce their consumption of cigarettes or quit smoking and spend their income on other goods, then the taxes might lead to better employment rate in other parts in the economy. Aims for reducing the demand of cigarettes will be determined by using price elasticity value. It will determine the proper tax value that will increase the prices of cigarettes to the level where consumption is reduced.

  From the discussion, we can see that the government is trying to increase the tax so that there will be less consumption of cigarettes. But at the same time, it has positive and negative effects to the economy. Raising taxes will bring many benefits to the society because consumers would not be able to spend most of their money on cigarettes and therefore, they would either lower the consumption or quit smoking. In addition, there would be less diseases and health problems related to smoking and less irritation to exposure. Although the tax of cigarettes may increase, that does not mean that every person’s demand for it may decrease. This may have a great impact on the poor since they will have to spend more income on cigarettes. The only situation that will change is their quantity they demand and not the demand itself. Besides, if the taxes imposed by the government are too high, it may cause smuggling activities and black market cigarettes will have a better profit. Therefore, the government should enforce the law by catching smugglers and sending them to jail. Besides, people who buy illegal cigarettes should be fined or jailed because they are buying illegal goods that do not have a tax. Other than that, even if taxes are raised, smokers will just switch to the cheapest substitution brand they could find and thus there will be still no reduction in the consumption of cigarettes. Another factor is that tobacco control will only lead to rural economy facing poverty to highly depend on farming tobacco. The measures to reduce the demand of tobacco may be a success, but the reduction of supply is not very effective. This is because even if one of the suppliers fails to supply the goods, another supplier will have the opportunity to come into the market. The addiction for cigarettes of consumers nowadays is so strong that raising taxes would not affect much on the demand. In my opinion, the government should come up with a strategy to create awareness for youngsters and non-smokers of the consumption of tobacco. Examples of strategies should include providing the education in schools to prevent smoking at early age and raising penalties for people who smoke underage or smoking at prohibited areas. The list of aims should include stopping youngsters from smoking, preventing influence of smoking to non-smokers, and provide health information to current smokers. After a discussion of a list of positive and negative effects, the government should increase the tax of cigarettes. Although some consumers may not be affected by it, but it could make a difference to the economy. Besides, the government should publish the results of health effects on tobacco and ban smoking advertisements. Most importantly, public education is one of the most important ways to prevent smoking. The reason youngsters smoke is mostly because of parents who smoke. This will link to their children smoking and influencing other friends. Therefore, youngsters should be given education to cherish their health instead of forcing them to quit as for smokers. 

Egypt faces fuel shortage

Article 1

Demand, supply, and market equilibrium

http://www.nst.com.my/latest/egypt-faces-fuel-shortage-1.64903

  This article relates to demand, supply, and market equilibrium in the economic concept. This article relates to the citizens of Egypt and their demand for gasoline. A demand is something an individual wants, can afford it, or planning to buy it. As for gasoline, it is one of the most important resources in the world. Therefore, almost every person that has a private transport has a demand of gasoline. The problem arises when the price of gasoline rises rapidly but there are no other substitutes that are able to replace it. So no matter how high the price of gasoline rises, people will still need it somehow. Furthermore in the article, even with the shortage of petroleum that occurred in the town, the people of Cairo are still demanding petroleum. It has been known that even though the price of petroleum has risen, it will not affect the demand of petroleum. The main reason of the shortage of petroleum is because of the lack of supply of petroleum due to problems such as political instability and street protests that are caused to the tourism industry. Therefore, the foreign demand has decreased which has affected one of a source of foreign income.

  In the equilibrium graph, the equilibrium is formed when the two curves are combined together. In order to determine a point where there are no surplus or shortage, the two curves meet at a point where the price and quantity will be shown in the graph. When the price has been known, the market price will be shown so that there will be no surplus. Due to the lack of supply and there is demand for petroleum; it will cause a shortage in the market.

  The graph above shows the supply and demand of petroleum. As stated in the article, the supply of petroleum has decreased but the demand for it still remains the same. When the supply of petroleum has decreased, the price of it will increase. But at the same time, when the price of petroleum increases, the quantity demanded will decrease as well. Therefore, if the price of petroleum increases while it affects the quantity demanded, the demand of buying petroleum will still be the same.

  In my opinion, since there are no substitutes for petroleum besides reducing the use of it, people should not always depend on their private transportation that uses petroleum such as cars or motorcycles. If they reduce the use of petroleum, they might most likely save a lot of petroleum and prevent any shortage crisis in the future. Since the price of petroleum will increase, people who have less income actually depend more on public transportations such as trains, taxi, or buses. This not only helps save their use of income, but also save petroleum that benefits the country and the environment. For example, Malaysia’s public transportation is convenient for many citizens when they want to go to places that have long distances since it is well priced and reasonable. Other than that, carpooling is one of the good ways to reduce the use of petroleum since only one vehicle is needed instead of many at the same time. Besides, in the country of Cairo, the government should also increase the price of private transport since Egypt does not produce any cars in their country. This will lead to the quantity demanded for private transport to decrease, as Egypt will not suffer a loss due to the country that does not have a national car brand. Unlike Malaysia, it has its own national brand of cars such as Proton. In this case, the government cannot simply increase the price as it will lead to a loss of profit. Therefore, if the price of private transportation increases, there will be less quantity demanded and it will result in fewer cars to consume petroleum. Furthermore, public investments in transportation industry can be made so that better vehicle operating efficiencies can be made. Such as an example of a country is Malaysia; investments in the transportation industry will lead to government producing national cars with better efficiency. Not only producing cars that saves petrol, but it also profits the government by having citizens purchasing national cars. Besides, the increase of fuel prices can lead to consumers or producers to have an interest in fuel-efficient transportation. The resource of petroleum has been decreasing year by year and it may someday be used up. Although it may take many years to create an environment where people are less dependant on private vehicles, but public investments on roads or waterways can reduce traffic congestion or delays so that vehicles can consume less fuel on the way. Most importantly, these actions must be followed by a large amount of citizens so that everyone can reduce the usage of petroleum and the shortage crisis can be solved and also prevent people from buying illegal fuel from black markets. When black markets exist, it will cause a negative impact on the economy because it is the taxes that protect the local economy. So if the producers in the black market import fuel from other countries without paying taxes, they will make a huge profit but at the same time, they will not support the local economy but the foreign economy instead. Therefore, the local government should consider jail sentences for the illegal producers and also consumers who buy illegal fuel because they are involved in illegal activities. In other words, they are no different than buying stolen goods.