GST

Morning peeps !

Overall, this article tells about type of tax for GST and how GST might be a high or low burden to different types of consumers. 

In general, GST is a value added tax in Malaysia which is also a general type of consumption tax. It is levied on most transactions of production process. The first question consumer might want to ask is whether GST is regressive or progressive tax. The answer to this question will determine the low or high burden that the consumers need to carry.

A progressive tax is a tax in which the tax rate increases as the taxable amount increases. This simply means that the higher the income, the higher the tax rate that one needs to pay, and vice versa.

On the other hand, regressive tax refers to a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. In this case, the higher income will help to lower one's burden in paying the tax.

So here, we can see that GST concept is related to regressive tax where both rich and poor people needs to pay the same tax rate regardless of the amount of their income. 

For instance, necessity goods are required by both rich and poor people. As this goods is inelastic whic is less than 1, the consumers need to pay more amount of tax compared to producers. 

However, different consumers would have different income where the high income consumers would not feel the burden to pay GST as much as low income consumers. This is because they have higher balance of income after paying GST. As a result, the low income consumer would need to purchase less necessity goods to ensure that there are more balance of income to spend on other requirement/liability.


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Property Imbalance Growing Wider

In this article, it state about the imbalance market of property where the level of demand and supply is not equal. As we know, in Malaysia, there are many developers struggling in the build up of the residental area. This is due to the rising demand of Malaysia citizens towards owning their own houses.

Unfortunately, the house developers don't get the profit as they expected. Why? If we compare the average income of Malaysian and the price of house per unit excluding the interest, majority of Malaysian can't afford to purchase the house that they dreamed of. Moreover, the declining achievement of Malaysian economy and the rises of goods sold could increase their burden and liability. 

As result, economic surplus occur. In this case, it will be producer surplus where goods are sold at a higher price than the lowest price the producer willing to sell for. This will lead to surplus in supply which indicates the price of the houses in this situation, might be too high.

However, the developers could get the profit if they work on a research and development and invent a new modern technology. This R&D could be the reason of the future economies of scale of property development where the cost advantage arises with increased of output of a product. The greater the quantity of goods produced, the lower the per unit fixed cost because these costs are spread out over a larger number of goods. The economies of scale may reduce variable costs per unit due to some reasons.

Thus, the cost of production could be reduced as well as the sell price of houses. This will not give a bad effect to the profit margin of the developers. Hence, the profit margin could be higher than before.

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INDIFFERENCE CURVE : Uber Vs Grab

Price Elasticity of Supply for GOLD

Just like demand, supply of goods also responds to price changes. The degree of price elasticity of supply depends on opportunity cost, time element, storability and variety of uses. But, for gold's price elasticity of supply is depending on the time element. 

There are 3 periods of price elasticity of supply and one of it is related to gold which is Market Period. It refers to period that occurs when the time immediately after a change in market price is too short for producers to respond with a change in quantity supplied. The time period is too short for producers to supply more or less quantity of goods as a respond to price change of goods. 

Graph 1 shows the price elasticity of gold where changes in price cause only a small change of quantity supplied. In other words, the changes in quantity supplied is smaller than changes in price of goods supplied. This is due to insensitivity of quantity supplied to changes of price of gold.

Unlike demand, as demand rises the price will also rise up. For supply, the rises in quantity of goods supplied will lower the price of goods and vice versa. When more and more quantity of goods are being produced, the price of the goods will eventually decline. As production of gold is expensive and time consuming, it would be quite hard for quantity gold supplied to increase. Thus, the price of gold will either remain expensive or rise up. This explain clearly about the inelastic supply of gold.

Please refer Inelastic Gold Supply to know more and get a better understanding :)