As per to Layton, Robinson and Tucker (2005) market structure is defined as the

characteristic of the market. Furthermore, it is supported by stating that it includes the

number of the firm active in the market, the degree of the products/services provided and the
feasibility of entering and existing the market. There are namely three market structure that
include perfect competitive market, pure monopoly, oligopoly and lastly the monopolistic
competition market (Mankiw, 2008).
Perfect competition market is defined as the market that act as the price taker, that has
many sells and buyers that sells homogenous goods and service (Layton, Robinson and
Tucker, 2005). Lastly with no barriers in entering and as well existing the market. In other
words firms in the market is free when to stop or start their business.
The fast food industry (Ungle bob chicken; that sells fry chicken in Malaysia) is one of
example for this market. Anyone with a frying facilities, a small budget can enter into the
market by setting their business anywhere they can reach the customers because the
information about the industry is easily available. However the thing is that they will have to
set the market price and act as the price taker. In other words, the firms can sell whatever they
wish but will have to charge the price. One way the firms determines their level of output is
profit maximization (Farnham, 2010). In this situation the profit maximizes when the vertical
differences between the firms total revenue and total costs reaches the maximum. Where the
profit is equal to the firms marginal revenue and also the marginal cost. Furthermore there are
three scenarios in the market that includes:
One is that the profit is equal to 0, here the firms in the market is actually enjoying a normal
profit in the long run and other is when the firm enjoys abnormal profit in the short run.
Lastly is the subnormal profit loss, even though the firms is making loss they can continue if
the firms variable cost is same as the firms total revenue. Since the firm may increase the
total revenue next month and experience profit by gaining more than firms variable cost.
However the unique thing is that the profit gain will always remain zero.
Monopoly market that is defined as the market that has mostly a single seller to supply the
entire industry (Layton, Robinson and Tucker, 2005). In addition they sell unique products
and is extremely high barriers to enter the market. In this market the firm is the price maker
and does very little advertisement in the market. Furthermore the firms make maximum profit
when the marginal revenue is equal to market cost. Another things is the imperfect
information and the firms can discriminate the price.

Example; Malaysia electricity provider is one of the example for monopoly market. The
tenaganasional is a large firm that provide electricity to the public living in Malaysia. Ever
since the establishment of this firm in 1949 they have been in the market as sole electric
provider. They act as the price setter and even the price is high or low the users dont have
much option other than using their service. Furthermore their product is unique, for example
electric city and gas both can be used to cook but gas cannot be used to on/run a fan. This
proves the uniqueness of their product and also due to the government policies it is extremely
difficult to enter into this market. Tenaganasional does not need to do any advertising since
they are the only service providers. In addition similar to perfect competition the profit
maximization occurs when marginal revenue is equal to marginal cost.
Monopolistic Competition: The market characteristic is that there are many sellers, a
differentiated product or service and lastly easy barriers to enter and exit the market (Layton,
Robinson and Tucker, 2005). For the monopolistic competition the personal computer
industry can be considered as a perfect example for this industry. Since there is various sellers
in the market namely, DELL computers, Apple computers and Toshiba etc. Each of this firm
is unique from each other for example DELL provide their service and product as online
purchase. In this market the products and services are differentiated in terms of their
packaging and product quality etc. In other words they compete each other using these
different concept. Furthermore the firms in the market is the price setter and profit
maximising occurs when the marginal revenue is equal to marginal cost. However in long run
the firms in the market will experience 0 profit. They will use various means of advertising to
promote and increase demand for their products.
Oligopoly Competition:
Oligopoly market is has few sellers that has a homogeneous product and has a high barriers to
enter. The education industry can be a good example for Oligopoly. Even though there is
many universities and colleges in Malaysia just few universities controls the industry. For
example, Taylors, INTI, Nilai University, Help and Segi are some of the names in the
industry. Here one firm normally act as a cost leader and other just follow them. Example is
when one university increases their resource fee others will do the same. However the thing is
that these action are done in tacit collusion that does need any formal agreement. This is
because under Anti competition act Malaysia 2010:, Article 4 (1), it is not allowed to go into

any agreement that restrict or destroy the competition in the market. A way to do legally is
forming cartel where they come up with agreement and operates based on it.

Absolute price is the general measure of price level in the economy through several indices in
order to measure the price for all goods and services. This type of pricing is mainly used or
focused by the Macroeconomic point of view (Layton, Robinson and Tucker, 2005). Absolute
price can also be referred as the amount of dollars is exchanged for a given number of goods.
Whereas the relative price is referred as the quantity of another good which can be exchanged
for a specified quantity of the agreed good/services (Layton, Robinson and Tucker, 2005).
In this case, the absolute price of the product B has increased by RM1.50 to RM2.00, where
by the price of product B is the number of RM that is required to buy the purchase one unit of
product B. However, the change in the relative price of the Product B is not equivalent to the
change in the absolute price of the product B. The relative price of product B in terms of the
A can be the amount of good A that is required to buy a unit of good B. While the absolute
price of product B is may change overtime however relative prices of the two products might
remain the same. This is because we can compare the relative based on the number of unites
of product A which can be bought in terms of product B. It is important to understand that we
cannot measure the relative price of these products in terms for the change in the RM of the
two products.

Consumers tastes and preferences; this is one of the factor that should be considered,
because whether consumers are willing to accept the product or services or not. When
consumers want a specific product the demand increase and has a direct relationship with
demand curve.
Consumers income, the income of the consumers is also very important factor because the
income level increases the demand for the car will increase. Here actually exists a direct
relationship with demand curve.
The consumers expectation is also another important factor, but this has a direct and inverse
relationship with demand curve. For example when the consumers expect that there is going
to be an increase of tax then the demand of the product increases.

There are three major types or sources of spending in an economy. This

includes the consumer spending, capital investments and government
spending. Consumer spending is also referred as household spending on
goods and services. There are many factors that influence the willingness
and capability of consumers to spend and this also has a huge impact on
the circular flow of income in an economy. The main areas that influences
spending of households include their disposable income and expenditures
the disposable income of consumers is the income or money they are left
with after direct tax and other welfare benefits are paid out. Often referred
as the consumers propensity to spend, indicate the level of spending that
is occurred due to a change in the level of income.
Usually household with lower income have a more or high propensity to
spending. Household or consumer spending which includes spending on
household items such as food, clothes, housing, electricity and holidays,
has the most significant influence on the total aggregate demand. The
pattern of consumer spending are depend on their household income,
tastes and fashions, taxes, benefits or subsidies, and also the relative
prices for certain goods or service. On the other hand, the determinants of
household spending can be a several factors such as the national income
level at which the economy currently is, as the income level increases
households spending increase on high income elastics products and
service including luxuries like leisure products and holidays. Other factors
that determines household spending is the level of saving, expectations,
unemployment, rates of tax on income and interest rates.
The household spending is an extremely vital measure of to check the
health or fitness of the economy. For an instance, if there is an decrease in
the spending of households it can indicate that the economy is performing
low and is such times the government plays an important role to increase
household spending through artificial methods such as increasing tax cuts
and money handouts hence, this leads to consumer spending to increase
and it further stimulates the supplies and employment as well.

The second most important sources of spending come from investment

and capital projects by firms. Investment is often called the capital
spending on goods which includes firms investments on new factory and
other equipments and machineries. Capital spending or investments are
also an important element of the aggregate demand is a major factor that
influences the competitiveness of an economy in the global world.

While

in the market economies a large percent of the investments are carried

out by private business sector, a considerable amount of new investment
are also carried by the government, especially in the development of
infrastructure. An increase in the capital spending can have a significant
impact on the demand as well as the supply side, and this further cam
includes a positive multiplier effect on the economys national income.
Government spending or government expenditure includes the amount
that the government spends on the public services such as defence.
Further, the government spending can include fiscal policy and taxation
used to influence the economic growth of a nation.
In 2013, the government of Malaysias spending was MYR 35,481 million
during the fourth quarter of the year and currently the government
spending is equal to 29% of the GDP of the economy. On the other hand
the total consumer spending of Malaysia in 2013 last quarter was MYR
104,161 Million. The main contributor the economy of Malaysia is the
service sector
a) Subsidies are government payments made to producers in order to
decrease the production costs (variable) and also to make them more
encourage increasing their production output. As mentioned in the
question government subsidies are often given to goods such as sugar to
increase the number of goods bought by the consumers. Especially, this is
done if the government believes that it will be beneficial for the
consumers. With the subsidy on sugar and oil it will allow consumers to
increase their real incomes as the effect of subsidy will lead to prices of
both sugar and oil to go down. For the producers of oil and sugar it will
decrease their production costs and the result would be an increase in

their production. The impact of a government subsidy would be to shift

the supply curve for both sugar and oil to move downward and effect
would a raise in the supply of both the commodities.
The governments giving subsidy for sugar can be considered as a good
decision as the it has been viewed by a lot of countries as significantly
important to maintain as well as protect the sugar industry since sugar is
seen as basic necessity of daily life. If the trading of sugar is left only on
the market forces it will be difficult to avoid periods of high prices and
uncertainty of the supply of sugar. Hence, to ensure that there is stability
in the demand and supply of sugar, such subsidy or protectionism is
important.
On the other hand, looking at the governments decision to give subsidies
on oil can allow maintaining the market price of oil at a lower equilibrium
price. Also the price of oil is one of the commodities which can have a
huge impact on the inflation rate and the prices of other products in the
economy. Hence, the government of Malaysia giving subsidies to oil is can
have a positive impact on the economy of Malaysia. Hence the economic
argument for this decision would be it would keep the inflation rate in
control and allow the prices to be down .This is because, the subsidy to
the oil suppliers will allow keeping the market price of oil down and as a
result increasing the real income.
However, subsidy on commodity such as oil is not always seen as a
benefit. Some argue that when subsidy on oil is given in bulk it can cause
more wastage and with more high income consumer groups benefiting
and leakages as occurring. Further, lower to middle income consumers are
less benefited.

b) Using the subsidy saving the government can invest on a lot of projects
that includes development of infrastructures, education and to fund other
growth projects. With the savings of subsidy the government can
consolidate projects focusing on the enhancement of the social safety net

for the low income consumer groups to decrease the pressure they face
form high expenses.
Further, such saving could be used to fund development plans that can
increase the economys production capabilities such as development of
roads

and

other

infrastructures,

hospital

projects

and

housing

developments projects. Further, it would be also used as a source to fund

educational projects and establishment of more institution providing
education and to increase and enhance human capital development.