Sunday, June 9, 2013

Microeconomics

In the world, the people are facing the problem of scarcity. There are many questions like:  ‘Why do we need to choose?’...
‘Why do we need to make a decision?’…
There are always the reasons of why we should do this and not do that. It is because of the facts that we should aware on it which is scarcity.
What do we mean by scarcity? Scarcity can be defined as the unlimited demands by people but having limited resources.(Vengedasalam, D and Madhavan, K, 2007).
Basically, in every country has their owned resources but somehow, the resources are limited such as land. Therefore, it is impossible to fulfil every desire. To have full understanding on this topic, is shall quote Singapore and Hong Kong for example. Both the countries are currently facing the problem of land scarcity


                             
        In the small area that has been shown in the left hand side is Singapore and it is located at Southeast Asia which is between the Indian Ocean and the South China Sea. (Maps of world, 2013). Whereas in Hong Kong is a small island and it is located between the Taiwan Straits and the Pacific Ocean. It is a good strategic channel for sea traffic. (Hong Kong, 2013)According to the (Word bank, 2013) the size of the land in Singapore is 692.7 square km (About.com, 2005a)  ,whereas in Hong Kong is 1,092 square km (About.com, 2005b). The density for both countries is very high. The differences between Singapore and Hong Kong are 462.3 square km. This had showed that the land for both countries is very limited and important. Land are to be use in many areas such as building a residential, infrastructure, industrial and commercial and any others (Tan, H, 2013).  Unfortunately, the land area in Singapore is limited; therefore the government has to sacrifice some proportion of the land in order to build houses, business purposes and any others. Same goes to Hong Kong, the land has to forgo in order to meet the demand by people. Therefore, there is an opportunity cost for both countries.
Questions:  “What is the concept of opportunity cost?”
The opportunity cost can be stated that the cost of one choice that have to sacrifice to the best forgone alternatives therefore, the decision making has to be made (Vengedasalam, D and Madhavan, K, 2007). Singapore has solved the problem of scarcity by releasing the land of golf courses, release some area of military training grounds as well as the natural reserves of island for housing and industry (Tan, H, 2013). In Hong Kong, they have reclaimed the land for building as well (Boland, R, 2013).The possibilities curve can be explained as the basic economic concepts of scarcity, choice and opportunity cost (Vengedasalam, D and Madhavan, K, 2007).
In other word, the possibility curve shows the available resources in order to make used of land systematically (Vengedasalam, D and Madhavan, K, 2007).The possibilities curve is showing the a few combinations of goods and services with a specific times (Vengedasalam, D and Madhavan, K, 2007). For example like clothes and machine, these two goods can be show in the possibility curve. The factors that can influence the curve is the land, labour capital is increasing as the output increasing (Vengedasalam, D and Madhavan, K, 2007). This has shows the improvement within the particular time. Improvement in technology also can cause the possibility curve change as well because the technology can improve businesses as well as lifestyle. Due to the increase of population in Singapore and Hong Kong, the possibility curve shall move outwards.


     
Besides scarcity of land, the demand for housing is also high in Singapore and Hong Kong due to the increasing population in both countries since 1960 till present. Based on the graph, the population in Singapore has increase to 5.1837 million whereas in Hong Kong, the population is 7.0716 million (World Bank Search, 2013). This shows that the population in Hong Kong is greater than Singapore which is 1.889 million (World Bank Search, 2013).
Before this, the demand can replaced as the consumer or people’s willingness and affordable to buy specific goods (Vengedasalam, D and Madhavan, K, 2007) which can be shows in Singapore and Hong Kong. Again, the problem of scarcity which has to be face by people in Singapore and Hong Kong, therefore the demand for houses is higher because the availability of houses is slightly less than to the population.

            The changes in demand is depends on the prices itself of a house because if the prices increased, then the people will demand less as states by the law of demand. In Singapore, the people cannot afford to buy a house because the prices of the property is high therefore the demand curve is shift towards the left hand side (Goh,G 2012)
       
            Not only that, the demand can be determinant by the income level. The average income level for Singaporean is at S$2,100 per month (Goh,G 2012). As you can see the income level is far gap and had prevent the citizen to own a property which is prices had been increase tremendously in this past few years. In Singapore, the government had take measurement to help the citizen to fulfil their dream to own a house by imposing several guideline for the low to mid income earner. They had develop the HDB flats for low to mid income earner as the prices of HDB flats are affordable but, subject to the eligibility to the regulation in Singapore (HDB Infor Web, 2013) . This apply to the Hong Kong as well but the spaces for the houses is slightly smaller. The price of the houses has determinant the income level of people.
 

                                                                                                  
 (Rubens,2013)
    





     The demand for housing ,recreational parks and entertainment in Singapore and Hong Kong is high due to heavy influx of immigrants migrating to work in the country. Therefore, the supply has to increase in order to meet the demand. As the demand gets higher, shortage of available land occurs. When shortage happens, prices increase. This is the definition for demand vs. supply. As a result, it will cause the supply curve move to the right, and then the prices are increases as well as the quantity.

      Prices of property have increase in leaps and bounce in Singapore due to foreign investment in the property sector. Therefore, the quantity of houses has decrease which causes the price to increase in Singapore and Hong Kong which has limited land. For example, a house is charged at the lower price so the buyers are willing to buy 3 houses, but sellers can only sell 2 houses only because the seller has limited houses to sell. Therefore, there is the shortage of 1 unit of house. In Singapore, the available houses are getting less due to the immigrants. So, they increase the prices for housing in order to meet an equilibrium line when there is no shortage. Normally, prices are dictated by the people who demand food, houses, utilities, and others. When there are more people, the supply is very important to them in order to get sufficient needs. It would bring the negative impact to the Singapore citizen because they cannot afford to buy a house.  
            One of the way, the government has imposed the taxes towards the property in Singapore and Hong Kong (Takhur, P and Chen, S,2013). People who buy a luxury house should pay more taxes for the property in Singapore (Takhur, P and Chen, S, 2013). Not only that, the government has also imposed taxes in vacant investment and same goes to the rental. In Hong Kong, taxes have been increasing towards the property. The government has double the taxes that for property costing more than HKS2 million (Takhur, P and Chen, S, 2013). This tax is also imposed to the wealthy person and those who owned expensive homes (Takhur, P and Chen, S, 2013). It also imposed towards the commercial estates as well (Takhur, P and Chen, S, 2013).
(Community care fund, 2013)
    
     On the other hand, the government in Hong Kong has subsidized towards the houses (Community care fund, 2013). This subsidy is targeting to the lower income people and it have to meet a few criteria for applying. For those who are living in cubicles, cocklofts, bed spaces in private buildings or temporary housing(Community care fund, 2013). Furthermore, the limitations are HK$8,740, HK$13,410 and HK$17,060 for one-person households, two-person households and three-person households, respectively(Community care fund, 2013). Besides from that, the subsidies for a person is HK$3000, while two persons is HK$ 6000, but if is three person is only HK$8000(Community care fund, 2013). This subsidy is to help the producer to produce more after subsidy by government(Community care fund, 2013). As you can read from the research done on the above, both the countries are seriously facing land scarcity and they need a great measurement to protect their next generation. As what we can know now the housing price is at the high side. It is very difficult for the young generation is not able to purchase any property in near future. Somehow, most of the parent are aware on this phenomenon, and they are starting to help the young to purchase property at current prices which is counted as still affordable. The government support and subsidize in the controlling of the house price is a must.

Words: 1539

References

        About.com (2005a) Geography. Available from: http://geography.about.com/library/cia/blcsingapore.htm [Accessed 7 June 2013].  

         About.com (2005b) Geography. Available from: http://geography.about.com/library/cia/blchongkong.htm [Accessed 7 June 2013].   
  
      Boland, R (2013) Photo tour for central Hong Kong: Reclaiming the Coastline.   Available from: http://gohongkong.about.com/od/whattoseeinhk/ss/centralpictour_4.htm [Accessed 7 June 2013].     
        
      Community care fund (2013) Eligibility criteria. Available from: http://www.communitycarefund.hk/en/ihp02.asp [Accessed 7 June 2013].

       Goh, G (2012) Is the demand for residential property in Singapore sustainable? – the “6 Million” question. Available from: http://sg.news.yahoo.com/blogs/property-blog/demand-residential-property-singapore-sustainable-6-million-080619235.html [Accessed 7 June 2013].  

      HDB Info Web ( 2013) Eligibility to buy. Available from: https://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatEligibilitytobuy?OpenDocument [Accessed 7 June 2013].
   

            Hong Kong (2013) Hong Kong Location. Available from:  (http://www.hongkongtravel.org.uk/travel-tips/geography.html  [Accessed 7 June 2013].

      Map of World (2013) Where is Singapore. Available from: ttp://www.mapsofworld.com/singapore/singapore-location-map.html  [Accessed 7 June 2013].  

      Rubens (2013) Low income apartments in Hong Kong. Available from: http://koikoikoi.com/2013/03/low-income-apartments-in-hong-kong/ [Accessed 7 June 2013].  

       Tan, H (2013) Land scarce Singapore looks underground for space. Available from: http://newsinfo.inquirer.net/363211/land-scarce-singapore-looks-underground-for-space [Accessed 7 June 2013].  

      Takhur, P and Chen, S (2013) Singapore to raise property tax rates for luxury homeowners. Available from: http://www.bloomberg.com/news/2013-02-25/singapore-to-raise-property-tax-rates-for-luxury-homeowners.html [Accessed 7 June 2013].  

    
      Vengedasalam, D and Madhavan (2007) Principles of Economis. Malaysia: Oxford Fajar.



       

       
      

        



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