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Income Distribution And Poverty In Malaysia Economics Essay

1.0 CHAPTER 1 Health and education is the two important components of human capital. This becomes the most important needs to Malaysian people because health and education have a strong relationship between the income distribution and the level of poverty in Malaysia. Besides that, the health status and educational level are use in measured the level of income and the level of poverty in a country.
Problem Statement The specific problem statement of this study is shown below:
There is a strong relationship between health status and education level on the income distribution and poverty in Malaysia.
There is a gap of the income distribution between the educated and healthy people with the low-income and unhealthy people in Malaysia.
Income inequality and poverty is not satisfactory in Malaysia.
Research Objective To identify the relationship of health and education on income level and poverty in Malaysia.
To determine whether education level gives impact on income level and poverty in Malaysia.
To identify the factors of poverty in Malaysia.
Scope and limitation of the study This study was focus on identifying and investigates whether health and education affect the income level and poverty in Malaysia. To examine and determine this relationship, it is important to measure the significant of each of the variables related to this study. Other than that, this study will cover and use the data from 2005 until 2009 in Malaysian country. The data areas are the real per capita gross domestic product (GDP), public spending on expenditure (percent of GDP), total enrolment in primary school and life expectancy of birth. The data are obtained from Department of statistics Malaysia and World Development Indicators (World Bank).
significance of the problem This paper is important to the economic development in Malaysia as this study will help the government to identify and determine the important area that need to be improved in order to reduce income inequality and solve poverty. Other than that, this paper also can help the Malaysian communities to improve themselves by showing them the important of higher education level which is the important factors contribute to higher income level.
Chapter outline In chapter 1, we will discuss about the introduction of this study. We will know a little bit about the important of health and education. After conducting this study, we will determine the problem and after that we can develop the objectives of this study. Lastly, we can determine the scope and limitation while conducting this study.
Chapter 2 discuss about the relevant literature review. We explained the variable in this chapter which are the health, educational level, income inequalities and poverty. The conceptual framework also included to explain the relationship between the independent variables and dependent variables.
Chapter 3 explain about the data and methodology. This refers to the data used, the population and sampling methods that was very important to this study. From the data that we find, we can analyze the data and make a hypothesis. After that we can test the data.
2.0 CHAPTER 2 2.1 Introduction As we looking at the present condition in our country, we can see that there is a strong relationship between the health and education level with Malaysian communities’ income distribution and poverty. This can be simplified as, there is a gap between the income distribution of the educated and healthy people with the poor and unhealthy people in Malaysia. This problem caused by some factors or variables that contribute to the income inequalities and poverty. Because of that, the government and the communities itself should identify and determine any areas that should be improved and find some suggestion to solve or reduce this problem. So that, we clearly see that the best way to reduce and improve this situation is to improve the health and education status in Malaysia as this is the common factors in determining the income level and poverty level in one place. After do some reading and find some literature review related to this situation, this study presents the investigation of the effect of the two important components in human needs which are the health and education on the income distribution and poverty in Malaysia.
2.0 Theoretical Framework Health Status
Education level
DEPENDENT VARIABLE -Income inequality
Level of Savings
2.3 Literature Review There is an effect of health and education on income distributions and poverty in many areas in this world. This can be explained through some relevant literature review. Other than health and education level, the level of savings also categorized as the main factors affecting the income distribution and poverty.
The problem of the income inequality and poverty is affected by health and education has investigated. According to Bakhtiari and Meisami (2009), the level of education, level of income, savings and health status can affect the income inequality and poverty. The higher educated people have more opportunities to earn more money or income. Other than that, the more literate people tend to have high awareness with their health and seeking medical when they ill. The finding of this paper is boosting the health and education status in Islamic countries will reduce the income inequality and poverty in Islamic countries. This paper also stated that Practical implications show that this empirical examination can help the Islamic countries government to identify any areas that should be improved in order to reduce the income inequality and alleviate poverty. Furthermore, this strategies help government to identify areas that should be improved upon in order to reduce income inequality and reduce poverty line.
To explain the facts that there are some important determinants of poverty and income distribution in developing countries, Dao M.Q (2007), use a sample of 40 developing countries in the world, it was found that some of the population below the poverty line is linearly depends on the human capital such as health, nutrition, and formal education. All of this is the components of improvements in the development of one country. This means that this human capital reduce income inequalities and poverty. After that, they also use 35 developing countries to measure and it was found that income inequality linearly affected by the same explanatory variables but other than that, the infant mortality rate and the primary school completion rate also affect poverty and income level.
Bastos (2010), Research has been done to the children in Portugal to investigate the profile of income-poor children and the results obtained states that 25 percent of them are at risk of poverty. They are from the low income families and this will influence the culture on their eating habits. This contributes to the facts that the people from the lower socio-economic groups do not eat healthily. Mackereth C.J also do some research on the culture of eating for the low income families and it also found the same results as Bastos where they are not eat healthily and eating whatever available in front rather than cooking the healthy food. It is because they don’t have enough resources and lack of time.
The relationship between socioeconomic deprivation and health status also has been identified by Drakopoulos S.A (2010). The result shows that the socioeconomic deprivation of child has negative effects on our health especially on our working stage. Our psychological health will decrease slowly because of this deprivation.
Another results found from Habibov N.N (2010) regarding the low-income transitional countries and this also prove that health status and education level can influence the self-perceived social stratification in the multi-country like Armenia, Azerbaijan, and Georgia. It is stated that the most affordable variables in increasing the income level of the low-income transitional countries are health status and education because this is the factors of growing the effectiveness of one country and improve the level of low-income people.
In his research, Adjaye, J.A (2004), examine whether the income inequality affect health. The relationship between these two variables has become the major problem in our daily life nowadays. The result shows that the people that have low-income profiles are more likely to fall sick because they don’t have enough resources to pay for the treatment and medicine. Other than that, it also found that the people from rich family can live longer than the poor family people. This can be simply stated that the higher income level we have the higher level of health we are.
To prove that educational can improve the peoples income inequality, Ning, G (2010) do some investigation in China. It was found that, expand more in educational will help us to reduce the phenomena of income inequality. Other than that, one of the ways to solve the problem of poverty is to do more investment in education because this will gives high return in future.
Lanaskoronskis, M. (2009) found in their investigation that Reflection of higher education will contribute to the high competitiveness of a country. Competitiveness refers to the skill people, goods and services we have, or ideas can be accepted locally and international. On the other words, higher education becomes the most important areas that contribute to increase competitiveness.
The common factors that contribute to the poverty can be explained through the paper of Wang, X. et al (2009) where they found that the poverty line in China are due to the lack of education that automatically causing the unemployment that will make them cannot gain enough resources to buy food. That’s why China government conduct some surveys to investigate this problem and they also found that the profile of the low-income people is unhealthy because of the lack of consumption of nutritional food in their country.
Education is the human’s resource to apply job and opportunities in one country. This is because education is the main source of a company, manager and employers to measure their level of income. Education is a human capital investment that gives a long-term sustainable development for them. In Benjamin, S.J (2011), it was found that household income is use to measure the Malaysian people ability to enter at any higher education institution. Lack of the resources will contribute to the lack of knowledgement. Besides that the parents will face the possibility to pay the high fees for their children. This is because before this they don’t take more attention on their level of education. They cannot apply a good job and after that their income is not enough to support the needs of education for their children.
3.0 CHAPTER 3 3.1 The data and methodology that we used in this study is unit root test and the Ordinary least squares (OLS) to represent the effects of health and education on income distribution and poverty. Besides that this will shows whether there is a relationship between the dependent variables and independent variables.
3.2 Data, population and sampling methods.
In this paper, the data was covering the time series data from year 2005 to 2009 that is 5 years. For the population, this paper focuses on the people of 14 states in Malaysia.

Factors that influence the demand for mobile phones

In the current competitive economy, any entities from non profit to multinational organizations that are considered as cash cow are in high demand for economic knowledge to survive. Economic system is the system by which the economy is organized. In this paper we are going to discuss about different types of economic systems, their variety, advantages and disadvantages.
Function of price in market economy
A market economy or free market economy is an economy in which the allocation for resources is determined only by their supply and the demand for them (J.Stanely Johnson, Introduction to economic analysis P1-1).In Market economy The price of goods plays a crucial role in determining an efficient distribution of resources .Price acts as a signal for shortages and surpluses which help firms respond to changing market conditions. In a market economy Price is determined by demand and supply, for example when there is a low price for a good it means the demand is low. However in market economy price for abundant goods never gets high to a critical point due to the fact of consumer sovereignty environment which consumers are the rulers for suppliers.
Figure: 01(Demand chart). Describes the demand relationship with quantity and Price
As it is observed in figure 01; P1and Q1 interception determines a good with high demand and low quantity so the price is at the highest peak. In opposite side of the Demand law there is supply law.
Figure: 02(supply’s chart) describes the supply relation with price and quantity
As it is shown in supply’s chart when the price is high for a product, supply will increase accordingly. And on the other hand equilibrium or balance will happen. As bellow
Figure: 03(equilibrium chart) describes How supply, demand, price and quantity are stable
Figure 03, determines how supply is dictated by price. Role of other factors like excess demand and excess supply are not declinable in determining the price in a market economy but is out of this paper’s capacity.
Market economy Vs command market
Command economy is an economy system that all economic activity is regulated by the government, formerly in China and the Soviet Union are two appropriate examples for such economic system.
There are two opposite approaches to an economy’s operation. The command economy is Hierarchy from top to down, and centrally planned economy of socialism (Roberts, Paul Craig and Karen Lafollette, Melt down: Inside the soviet economy, Cato institute ,PP12-13) The market economy is the divided economy of the market economy. The most tangible difference between the two is the existence of private property in the market economy and the absence of private property in the command economy. The belief about command economy is that it is planned and organized while market economy is unplanned. Contradiction to this view is the fact that market economy is very intelligently planned via consumer demand through the price system. Moreover, for five reasons the command economy is doomed.
First, effort to plan an entire economy by a main decision making body is ineffective as the bulk of task is tremendous. That is impossible that a board of few hundred planners could know the needs, conditions of resource availability, and localized knowledge spread throughout an economy. Second, the command economy motivation factor eventually is based on force and compulsion. The main element in an economic system is in fact people; therefore controlling an economy is first and foremost control of people. Unfortunately human motivation is reduced when force is used in any area which dooms that entity to end.
Third, the command economy is based on collectivism which means collective control over production and distribution. Individual encouraging is absent. For example, with ten employees in an economy each will receive one out of tenth of total output. If one person neglects, his loss is only one of tenth of the production he would have produced. So the loss for an entity with a population of millions is dramatic and sometimes irreversible .It turns out that everyone is trying to live at the expense of others and accordingly production efficiency and effectiveness both will reduce.
Four, the incentive for production is to satisfy the political authorities who have control over the workers life. In contrast to the market, where production is relied on consumer’s demand, consumer is not a vital factor to the command economy.
And last but not least, economic risks are much likely to be higher in command market in compare with market economy, failures such as excess demand and excess supply are more likely to be less or at least are not as intense as command market as consumer’s demand plays a vital role in market economy and is more manageable.
Command economy has advantages as well such as bellow
Government removes all private contributors and tries to contribute products equally. In this way poverty level will be reduced and there is equal income. Social services are also emphasized in this type of economy. Command economy has capability of fast changes in major problems. For example if a company has to be shifted it will be fast as government has the whole power.
Practically bankruptcy does not exist under the command of government and if there is a loss in any enterprise it will be compensated by other resources that are under command of government. For example if any entity has loss and is in need of cash government is responsible for cash injection.
In overall every economy system has its own advantage and disadvantages, the current economy paces are toward capitalism which might be the answer to all of prayers. Even though there is no pure market economy systems used in the world and are most considered as mixed economy but still changes are toward capitalism and countries with the background of command economy have taught us that consumer demand is most important factor in economy which its ignorance causes the failure of the whole system.
Factors that influence the demand for mobile phones
Mobile phone markets are one of the most turbulent market environments today, due to increased competition and change. So it is important to look at consumer’s decision process and recognize the factors that determine the consumer’s choice between various brands of mobile phones.
Factors that influence the demand for mobile phones are vary; we try to cover some of the most important.
Technology: twenty century is the communication century, every day new phones by new features are produced, when there is a new technology or feature is added to mobile phones it will increase the demand, as an example for technology, when a technology like Bluetooth started to be added to new phones, demand for the phones with this technology increased, or for new feature like camera the demand increased. Nowadays mobile phone companies are using societal marketing concept as their marketing plans, which means they focus on consumer needs, while some companies like apple go even further than this concept and determine new needs for customers by invention and technology. They create something in a manner that goes higher than demand and become a need which is described as state of felt deprivation. While demand is described as human wants based on their purchasing power.
Environment, as the world is leading to globalization, environment plays a critical role in determining the demand, as long as a person is in an environment that is affected by a product he/she will get affected by that product, for example resistance to change is much lesser in an environment that is commonly agree on the demand of a product.
Usage of Price elasticity of demand and income elasticity of demand in phone companies
Price elasticity of demand is measured by “the responsiveness (or sensitivity) of consumers to a price change,” according to Campbell McConnell and Stanley Brue (2004, p.356).
The price elasticity of demand tool could be used to assess the several pricing plan to determine if the price should be reduced to attract more consumers, or to increase the price while making the product more attractive and more features to make it better bargain. This way also they can realize how elastic is their supplies. It also could dictate that different phones have different potential in elasticity, for example Nokia company Produces N series and E series, then company realizes the E series are highly elastic while N series are more likely to be inelastic in compare with the E series, so Company increase the production of N series while the price is stable, and lowers the production of E series in order to prevent the risk of excess supply.
Income elasticity of demand is”the ratio of proportional increase in quantity demanded to proportional increase in income, with all prices held constant. A luxury is a good with an income elasticity of demand in excess of unity”. [1]
According to income elasticity of demand companies can estimate the future prices and production. As income elasticity is more likely to be effective in luxury goods companies can determine also the quality of the goods. As the world economy faced the recession and has just getting out of trough phase is recovering itself which means that in future we will face the peak or economy boom, it is when consumers purchasing power increases and are more likely to intend toward quality rather than quantity. That is when Income elasticity of demand tool could help the companies to determine whether they could increase the quality and/or price and/or quantity accordingly. For example Sony Ericson realizes that demand toward its expensive product is increasing opposed to its highly affordable cell phones. This determines that economy now has the potential for a higher demand especially on expensive products.
In overall doctrine of elasticity in economy helps supplier to understand, interact and connect to consumer. It helps you to have a communion with economic and its factors, also has an important role in planning and even marketing in an organization. A Company Like AirAsia that in the trough of recession Was The only airline that had a “271% ahead of pre tax level profit in the first quarter of 2004” (Fourth quarter repot 2005, Airasia [2] ), While all of the other companies only suffering from loss. Such companies like AirAsia have won their ticket by futuristic and planning using doctrine of elasticity analysis. It shows no company no matter how big needs to have planning and analyze in all its area and aspects.