First of all, I would like to introduce the business firm that I had chosen for this microeconomics weblog discussion which is S P Setia Bhd Group, it is one of the largest property developer in Malaysia. Liew Kee Sin is the founder of this company, and the year of establishment is 1974, there is more than 1500 employees all around Malaysia, it is a big size of  business firm. In currently 2013, S P Setia Bhd Group has been named The Edge No.1 Property Developer for the 8^th time, it’s truly an award-winning public listed company and a market leader in property development in Malaysia.( Spsetia.com.my, 2013). Come with the strengthens of this company and its economic structure, they have the ability to solve economic problems efficiency and effectively.

        Firstly, one of the basic microeconomic theories obviously is demand and supply. Demand is something that consumer willing and able to buy. Quantity demanded is the amount of good or services that consumer plan to buy at a particular time period and particular price. The law of demand says that when other things remaining the same, if the price of a good increase, the quantity demanded will decrease and vice versa, Figure 1.1.( Iisscalamandrei.gov.it,2013).  The law of demand results from substitution effect and also income effect. Substitution effect is says that when the relative price of a good or services increase, the rasional consumer will find other substitute, so the quantity demanded of the good or services will definitely decreases ; Income effect is says that when the price of a good rises, people cannot able to buy all the things compared to before, so the quantity demanded of the good will decreases, and vice versa. (Investopedia,2009). The demand curve shows the relationship between the quantity demanded of a good or services and its price over a particular time period, this is comes when other determinants remain the same.

           For the past 10 to 20 years, price of property has keep increasing all among the states in Malaysia, so due to the law of demand, obviously the quantity demanded of property or housing will decreases.

           Apart of the price of the property changes, the one of the other determinants of demand for property is the house loan interest rate, due to some researches, the house loan interest rate in Malaysia is considered low as compared to other countries like Singapore and so on, as the house loan interest rate is lower, people will have more consume power to buy property, so the demanded of property will obviously increases, this will make the demand curve shift to the right, this is called as change in demand because of other determinants apart from the price of the good. (Investopedia,2009).

         Supply works almost the same the demand, just it is standing on producer or supplier’s perspective. Supply is when the producer has the resources to produce a good or services, can earn profit from producing it and also must has the plan to produce and sell it. When other things remaining the same, when the price of the good or services rises, the quantity supplied will increases also, and vice versa, these are come from the law of supply, the relationship between the price and the quantity supplied of a good is positive, (Figure 1.2). (Iisscalamandrei.gov.it,2013). The supply curve shows the relationship between the quantity supplied of a good and its price at a given time period, when all other determinants remain the same. (Investopedia,2009). For example, for the past 10 to 20 years, price of property has keep increasing all among the states in Malaysia, so due to the law of supply, obviously the quantity supplied of property or housing will increases.

                                                                      (Figure 1.2)

          What is market equilibrium? Market equilibrium occurs when price balances the plans of consumers and also producers. At this point, the equilibrium price and equilibrium quantity will be equals between consumers and producers. However, when the price go below than the equilibrium price, the quantity demanded will exceeds the quantity supplied, this will caused a shortage. When the price go beyond than the equilibrium price, the quantity supplied will obviously exceeds the quantity demanded, and this will caused a surplus, see the figure below. (Econlib.org,2013).

        According to researches, the population of Malaysia has increased about 5% due to the migration or other issues, this has made the demand of housing increased, the demand curve will shift to the right due to the other determinants of demand, while the supply curve is not changing because the supply of property cannot increased in a short period, at the original price, that will caused Malaysia an issue which is shortage of housing because the quantity supplied of housing is now more less the quantity demanded. (Propertyguru.com.my,2013). To the problem of high demand, there is not much thing that the property developer can do in the short-run or short time period because there are fixed input such as capital and land. So, to solve this problem, in long-run, this company need to produce more low-cost housing, so that this shortage issue will be solved, and the price and quantity of housing can go back to equilibrium, and so that the property or housing market can running efficiency.

           Another microeconomics theory that I would like to talk about is elasticity. The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good or services towards a change in the price of good when all other determinants of buying plans remaining the same. Percentage change in quantity demanded over the percentage change in price is the formula to calculate the price elasticity of demand. If the PED is greater than 1, the good has elastic demand ; a little change in price will get a big changes in quantity demanded. If PED is less than 1, the good has inelastic demand ; the quantity demanded will only change a little if the price change a lot. There are 3 more special cases in PED which is perfectly inelastic, perfectly elastic and unit elastic. Perfectly inelastic demand is when PED equals to zero, the quantity demanded doesn’t change when the price changes, the demand curve will be vertical ; Perfectly elastic demand is when PED is infinite which mean when the price barely changes, the quantity demanded will go infinitely large, demand curve is horizontal ; Unit elastic demand is percentage change in price and quantity demanded is the same, demand curve will be declining slope. (Aiu.edu,2013).

     

                    

       There are several factors that can influence the elasticity of demand which is closeness of substitutes, the proportion of income spent on the good and so on. When the closer the substitutes for a good or services, the demand for the good or services will be more elastic, but for example, the price of property in Malaysia are recently increasing so there are not much substitutes to housing or property ; so there comes inelastic demand. Another reason that caused inelastic demand to property is property or housing is a necessities for people, none of us can live without a house or property. Besides that, the greater the proportion of income consumers spend on a good, the elasticity of demand for that good will go larger ; this can definitely fit in the property’s case because a property is obviously will drag a big proportion in people’s income, so people will spending more time to compares all the house price in different areas and will choose the one that they can afford, so the price elasticity of demand for property or housing can be explained as an elastic demand. (Eprints.utm.my,2013). Another factor that can influences the elasticity of demand is time elapsed since price change, it mean the more time people have to think or adjust after a price change, or the longer that a good can be stored without losing its value, the more elastic is the demand for the good. The price of property are keep on changing all the time, but people have a lot of time to think or choose till they find a property that is suitable or they can afford ; besides that, property will not losing its value, so price elasticity of demand for property or house can considered an elastic demand.

          In conclusion, all of the microeconomics concepts or theories can be apply in the real world and also can apply in any business firm no matter what type or what size the firm is. Apart from that, every business firm will have their house strategy or ways to face and solve the microeconomics issues that comes to their firm, they will do anything just to minimize the cost and maximize the profit, so that they can run their business effectively and efficiency ; come with that, the business firm can also be more strong and last longer in their own business field or in this economic world. All the concepts or theories of microeconomics had been proved and its fixed, but business firm can have their own way to make all these theories used to fullest and also efficiency and effectively.

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Reference list:

Online References :

Aiu.edu(2013) Principles of Microeconomics. Available from : http://www.aiu.edu/publications/student/english/Principles%20of%20Microeconomics.html [Accessed 14 October 2013]

Econlib.org(2013) The 51 Key Economics Concepts | Library of Economics and Liberty. Available from : http://www.econlib.org/library/Topics/HighSchool/KeyConcepts.html [Accessed 14 October 2013]

Eprints.utm.my(2013) Modelling of the Property Market / The Malaysian Experience. Available from : http://eprints.utm.my/5591/1/Modelling_of_the_property_market-_The_Malaysian_experience-Dr_Norhaya_Kamaruddin.pdf [Accessed 14 October 2013]

Investopedia(2009) Economics Basics: Supply and Demand | Investopedia. Available from : http://www.investopedia.com/university/economics/economics3.asp [Accessed 14 October 2013]

Iisscalamandrei.gov.it(2013) Supply and demand. Available from : http://www.iisscalamandrei.gov.it/spazio_docenti/ragazzoni/clil/economia%20aziendale/Economic%20activity%20Trade%20Market/Demand%20and%20supply.htm [Accessed 14 October 2013]

Propertyguru.com.my(2013) State government tackles low-cost housing shortage. Available from : http://www.propertyguru.com.my/property-news/2013/8/10526/state-government-tackles-low-cost-housing-shortage [Accessed 14 October 2013]

Spsetia.com.my(2013) Malaysia's Leading Property Developer - S P Setia Bhd Group. Available from : http://www.spsetia.com.my/corporate/ [Accessed 14 October 2013]