Answer to Question #203023 in Macroeconomics for Amirul Hakim

Question

1. According to the Department of Statistics Malaysia (DOSM) in 2020, the production to five economics sectors namely services, manufacturing, agriculture, mining, and quarrying; and construction registered a contraction with a highly challenging domestic operating environment and lower global demand in response to Covid-19 Pandemic as shown in FIGURE 1. Therefore, it is putting into pressure especially to the Small-Medium Enterprises (SME) in Malaysia for making pricing decision on its products or services in relations to a firm's total revenue. Evaluate THREE (3) effects on a firm's total revenue in response between percentage change in quantity demanded for a goods or services with respect to the percentage change in price

based on specific economics sectors.

PRODUCTION

MINING QUALIVING

-10.6% -0.6%

SERVICES

-5.5% 6.2%

MANUFACTURING

-2.6% 3.8%

AGRICULTURE

-2.2% 2.0%

CONSTRUCTION

-19.4% 0.4%

FIGURE 1: ECONOMICS SECTORS PRODUCTION IN MALAYSIA

[60 marks]

Answer 1

The pandemic would result in the depression and a recessionary phase in the economy which would reduce the output of all the economic sectors. The contraction in the output would be because of the fact that the pandemic would reduce the demand of all the sectors in the economy.

The revenue is the total amount of income which is received by the firms from selling all the units. The elasticity of the good would be referred to as the percentage change in the quantity demanded because of the percentage change in price.

The elasticity of the good would be the percentage change in the quantity demanded because of the percentage change in the price. The price elasticity would be the percentage change in the quantity demanded because of the percentage change in price. Thus, the revenue of the different sectors implies a relation between the percentage change in quantity demanded because of the percentage change in price. The revenue for the sector would fall when the percentage change in price would cause a large change in quantity demanded and the elasticity would be high which would be the case of the construction, mining quarrying. The revenue which would remain remain same with the change in price would have unit elasticity whereas the sectors including manufacturing or agriculture are necessity goods for the consumer as a result the effect of the price would not show a fall in the revenue with a fall in the price thus having low elasticity.