Elasticity of Fuel in Malaysia

Running head: ECONOMICS
Economics
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Elasticity of fuel in Malaysia
Elasticity of Demand and Supply
Microeconomic is that branch of economics which is known to deal with the
behaviour of human along with the choices of small units in economics. The elasticity is the
term used in economics in order to describe a change in their behaviour of the buyers as well
as for the sellers in response to the price change of the goods and service. The elasticity of
good or service can change according to the number of close substitutes available, amount of
time, its relative cost which has changed when the change in price occurred. Now coming to
the elasticity, we have experienced that gasoline has relatively inelastic demand which means
price changes will be having a little effect on the demand. The price elasticities are known to
measure the responsiveness of the demand to the price change.
In case of Malaysia, we have found that mostly electricity, fuel and LPG are known to
have to inelastic demand. For the people like us in Malaysia, refuelling of the cars has
become one of the constant drains to our wallets. Currently this takes place more since the
petrol price have increased a lot. Since many of us depend on the private vehicles, we hardly
have any choices. As our demand for fuel will be quite same even when the rice goes up as it
is one of the necessary good, this can be termed as inelastic demand (Bekhet and Harun
2017). However, in other case, the law of supply states that there is a direct relationship
between the good price and the amount of quantity supplied of the good. The elasticity is the
term used in economics in order to describe a change in their behaviour of the buyers as well
as for the sellers in response to the price change of the goods and service. The elasticity of
good or service can change according to the number of close substitutes available, amount of
time, its relative cost which has changed when the change in price occurred. When the price

of the gods increases, sellers will be supplying more quantity of it. The law of supply is
known to be reflected in the upward sloping supply curve. The law of demand and supply
also states the fact that when the demand will be greater than the supply, the price will be
increasing and in case when the supply will be greater than the demand, the price will be
decreasing.
Therefore, it can be sated that the demand for fuel and petrol is quite inelastic in
nature. when I will be having a car, I will not have many alternatives to buy petrol. For this
reason, when the price of petrol will increase, it will fail to reduce my demand for petrol.
However, in Malaysia where there are many petrol stations close by, at that place the petrol
companies will be finding their demand to be elastic in nature (Bello, Solarin and Yen 2018).
Therefore, in that case when price is increased, it can lead to loss of market share.
Petronas which the Malaysian oil and gas company had been found on 17th August
1974 and is wholly owned by the government. Fossil fuel consumption in Malaysia is found
to be 96 percent in the year 2014 which is stated by the world bank report. However, in the
year 2017, the consumption of natural gas had been reported at 4.143 Cub ft/Day bn.
Recently it has been found out that Malaysia’s dependence on the fossil fuels for electricity
have been staggering (Taheripour and Tyner 2019). The elasticity is the term used in
economics in order to describe a change in their behaviour of the buyers as well as for the
sellers in response to the price change of the goods and service. The elasticity of good or
service can change according to the number of close substitutes available, amount of time, its
relative cost which has changed when the change in price occurred. Demand is the
willingness and the ability for buying the specific quantities of good in a given period of
time. I have also learnt that the law of demand is known to have reverse relationship between
the rice and quantity. The demand schedule for the graphs also represent a functional
relationship present between the amount of quantity demanded and the price.