澳洲作业代写 Report On Rise In Electricity Pricings
It is shown in "the tariff hike is expected to have the greatest impact on lower-income families " (Teo, 2010)
"Her family turns on two air-conditioners at night, and sometimes in the afternoon as well, due to the unpredictable weather " (Sim, 2010) From this example, we can conclude that even with the raise of price, Mrs Lui is unable to stop using the air-conditioners due to the unpredictable weather. This imply that electricity is a price inelastic.Â
2.4Â Â Â Effects of the Increase in Price of Electricity
Â Â Â The increase in price of electricity has affected the lower, middle and higher income people in many ways as well as the supplier. This causes the lower income families to reduce their electrical usage in order to minimize and ensure that they have enough cash to spend on other necessity such as foods and clothing.
Increase in Revenue
As electricity is price inelastic; an increase in price will result in a small decrease in percentage of quantity demand for electricity. It also produces revenue for the firm. By increasing the price of electricity per kWh, SP could earn more revenue to cover up the high operational cost of power generation. Thus this would allow the firm to achieve a normal profit or even an economic profit for it to continue generating electricity.
" higher capital and operating costs of power generation - which cover manpower and maintenance costs of operating power stations " (Teo, 2010) This shows that the increase in revenue is needed for the firm to cover its total variable and fixed costs to continue its business. It also shows that the total costs came from the cost of using resources such as labour, land, capital as well as entrepreneur to operate the power stations and this cost is called explicit costs.
2.5Â Â Â Reducing Cost
The increasing electricity pricings has caused the government to step in, helping its people, and ensuring that everyone in the country is able to enjoy and use electricity. It also has created awareness among the individual to find certain ways in reducing their electrical bills. However the firm also can help to reduce the electrical bills by minimising the cost of production.
The government have imposed price ceiling to prevent the price of electricity to be overly charged. Therefore the government have subsidised the firm, causing the firm to be able to give a lower price for the citizen. This is shown as Singapore Power Services (SP) is a subsidised Singapore power group.
In order to accommodate with the raise in electricity bills, people could use substitute brands such as energy saving electronic appliances such as light bulb.
"Some energy saving tips on the EMA website include switching off appliances at the mains, setting the temperature of the air-conditioner to 25 deg C or higher, and buying energy-efficient electronic."(Sim, 2010) This shows that consumers have to switch to alternatives such as using energy-saving brands or other saving energy means in order to reduce their electricity bills.
The firm could help reduce the cost of electrical bills by reducing its cost of production. In the way that it is only needed to increase the price at its minimum. It can be done by preventing the congestion and overcrowding in the power stations as it decreases the productivity level and also by having specialisation and division of labour. Specialisation will help increase the productivity level as the specialist is well experienced, thus it makes the work to be done way faster. While division of labour will help increase the productivity, as the workers are divided into different task, causing them to do work way faster.
By doing all this, productivity level will increase, lowering the cost of production. The firm also can reduce the cost of production by hiring a certain amount of worker, giving the firm benefits. As hiring excessive amount of worker will cause the company to spend extra money with a lower production rate. This is due to the law of diminishing returns.
SP could ensure that they have hired the correct amount of workers by comparing the marginal revenue product (MRP) with the wage rate. If the MRP is bigger than the wage rate, SP should hire more workers until the MRP is equal to wage rate or nearest. These will tell SP how much variable inputs to be employed.
2.6 Monopolistic Competition
The usage of alternatives energy-saving appliances to reduce the electricity bills has created a monopolistic competition (MC) among electrical appliance firms as the products they produce are not identical as well as not homogeneous but they are close substitutes to each other. However, product differentiation of each firms defines the customers decision in choosing which type of appliance to be bought from. This differences consist of the location where the goods are available in the market, the difference in its physical appearance, the services provided as well as the brand popularity.
It will eventually cause the demand for energy-saving electronic appliances to be more price elastic as there are a greater number of substitutes available to consumers.
Due to these increase of pricing, the demand of electronic appliances will increase. Shifting the demand curve to the right for electronic appliances. Example of the electrical appliances firms are Philips, Sharp, and other more firms. These firms are similar to SP as they are also a price maker. However it is differ as well, as MC firms have to lower down its price to attract more buyers via product differentiation.MC firms also have a gentler and a more price elastic demand curve than monopoly firms, SP.
On the whole, the microeconomics topics covered in these three articles are Monopoly, Monopolistic Competition, Elasticity and Demand. As there is only a handful amount of electricity suppliers and electricity is a necessity towards the consumers, these electricity suppliers are known as monopolist