Individual 2- Baby Milk Price

Parents want Milk for Babies to be made a Price Controlled Item

According to the news, Parents want Milk for Babies to be made a Price Controlled Item, 6 October 2012 which taken from the Star online, http://thestar.com.my/news/story.asp?file=/2012/10/6/nation/20121006163308&sec=nation, the manufacturers seems to raise the baby milk prices to a higher price in the market to gain more profit. Nowadays, the price for the baby milk is getting higher and higher and many of the parents cannot afford it, so many of them will hope for government to control the situation of the baby milk. Therefore, this news will leads to the demand and supply and also hoping for government intervention. The demand for the baby milk has decreased as the price had increased. When other things remain the same, price for goods had increased and the quantity demand for the good has decreased, is it known as the law of demand.

Furthermore, the law of demand will result from substitute’s effect and income effect. Substitutes effect is when the relative price which is opportunity cost of a good rises, people will seek substitutes for it, so the quantity demand for the good decreases. Therefore, I believe that many people will buy the cheaper product to replace the expensive product when they can’t afford the high price. In this case, many people will buy cheaper baby milk instead of the expensive milk. However, it will leads to income effect in the law of demand. Income effect is when the price of a good rises relative to income, people cannot afford all the things they previously bought, so the quantity demand for the good will decreases. People’s income has not increased but they are forced to buy things which the price is in the higher price level. The price for the baby milk has increased by the manufacturers but the people’s income remain the same, people will not able to afford the previous baby milk they bought, so they have to buy the cheapest milk which will cause the demand for the previous baby milk decreases.

Besides the demand has some changes, even the supply will has some changes too. As I know, suppliers will never do a business without gaining high profit, so it fulfill the law of supply that when other things remaining the same, the higher the price of a good, the greater the quantity supplied. Furthermore, the law of supply results from the general tendency for the marginal cost of producing a good to increase as the quantity produced increases. Producers are willing to supply a good only if they can at least cover their marginal cost of production. In this baby milk case, the suppliers which are the manufacturer will supplier even more expensive baby milk in the market. Every manufacturer wants to gain profit from the baby milk and they want to maximize their profit. These actions will not benefits everyone as not much people are able to afford the baby milk in higher price, the demand for it will decrease and at the same time the suppliers will not gain their profit from here. Therefore, many people are hoping for government to control this situation in the market in order to benefit everyone. This is known as the government intervention.

 As the baby milk price is higher, many parents are hoping for government to control the price for the baby milk as many people are not able to pay the price for baby milk in the market now. I believe that government should take some action such as set a price ceiling in order to let the people to afford the baby milk. A price ceiling is a regulation that makes it illegal to set a price higher than specific level. Any price that set above the price ceiling is considered as illegal, so the manufacturer will lower the price for other poorer people. With price ceiling, many people can afford the baby milk and the qualities of the baby milk will also as good as the others. Government should set the price lower than the old times, so that it is also benefits the poor. However, if the government set the price too low it will cause powerful effect which is shortage of the baby milk. In the lowest price, suppliers are not willing to supply more baby milk to others. The demand for baby milk will increases as the price is low because they can afford it. This will cause shortage because the quantity demand for the baby milk exceeds the quantity of supplies. Many people will demand more for the baby milk as the price goes low. When the price is set in too low, the search activity will increased and there is also a black market existing. The time looking for someone to do business with is known as search activity. Many people will search the lowest price of baby milk and do business with the person. People might end up in a black market where it is an illegal market. If the government set the price higher than the equilibrium price, it will also cause problem which is surplus of the baby milk. Surplus is the quantity supplied of the good exceeds the quantity demanded for the good. Therefore, government cannot set the price too low or too high which will cause big problems to everyone. In addition, I also believe that government should also provide subsidies to the parents such as letting the mother have work out time to nurse their children.

In conclusion, the price of baby milk in the market now is too high which cause some of the people who less income cannot afford it. Parents are hoping that government will control this situation by stopping the price of baby milk increasing by manufacturers. With government intervention, people’s life might be easier than previous time but it will also cause some problems to others which are mention above. In addition, sellers and buyers have to corporate with each other in order to gain benefit. Sellers must willing to sell their products in a price level that buyers are willing to buy and afford to buy. By this, both of the sellers and buyers can gain their benefit together at the same time. 

(1034 words)