Cheaper Smartphone for the Youth

Samsung Galaxy S3 that are on many youths' wish list! 

Based on the news from Star Online entitled ' Government Working on Smartphone Rebate', the Prime Minister of Malaysia Datuk Seri Najib Tun Razak has announced the Budget Plan 2013 that has become the hot topics for everyone in Malaysia. One of the highlights was government allocating RM300 million for the matter of smartphone rebate mechanism, which entitled Malaysians aged between 21 and 30, earning up to RM3000 a rebate of RM200 when purchasing smartphone. Accordingly, the purpose of this mechanism is to provide financial assistance for the youth in acquiring a smartphone as it is considered an essential gadget nowadays in order to have access to the latest information anywhere, anytime. Once the smartphone rebate mechanism is fully implemented, it will influence the microeconomic aspects of the country.

Assuming the rebate mechanism for smartphone is successfully implemented, this makes the purchasing of smartphone possible for the poor. More people from the age groups will begin their search activity for their ideal smartphones, taking into account their budget most of the time. The law of demand states that when other things remain the same, the lower the price of a good, the greater is the quantity demanded.  With the rebate mechanism implemented, a Samsung Galaxy Mini smartphone for example, which usually cost about RM600 will now only cost the consumers RM400.  This will surely increase the quantity demanded for that product. Of course, in reality not only the quantity demanded for Samsung Galaxy Mini smartphone will increase, the quantity demanded for all different brands of smartphone will increase as well. This is due to the fact that the opportunity cost of purchasing a smartphone has lowered down.

However, the opportunity cost of purchasing smartphone will not necessarily lower down for some individual as the smartphone they intend to purchase may cost over RM1000-2000 above, hence a rebate of RM200 may not make a lot of difference. Besides that, the targeted beneficiaries who are from family that has a lower income will mostly hugely benefit a rebate of RM200. Those who earned only up to RM3000 but comes from a well off family background may not see RM200 as anything significant. Therefore, the increase of quantity demanded for smartphone might only affect smartphone with a price of about RM1000-RM1500 maximum.

Quantity demanded for complement goods of the smartphone may also increase; such as the smartphone accessories like phone cases, earphones as there are more people owning a smartphone. As a smartphone is useless without a mobile data package plan, the quantity demanded for data package plan provided by telecommunication companies may increase as well. This factor will lead to a decrease of quantity demand in prepaid plan from telecommunication companies and an increase of quantity demand in postpaid plan for their smartphone as postpaid plan provide a more worthy data package plan.

Substitutes of smartphones include laptop and tablet such as iPad and Samsung Tab. Quantity demanded for these might also decrease. Purchasing these will not entitle them a rebate of RM200. Other than that, the mobility and convenience of a smartphone is much better than the laptop and tablet. Hence, the opportunity cost of purchasing tablet and laptop is higher compared to a smartphone. Besides that, when comparing a smartphone with a laptop or tablet, smartphone will be seen more as a necessities, less a luxurious goods. Therefore, the beneficiary from the rebate mechanism will prefer to purchase a smartphone compared to the substitutes.

The law of supply states that when other things remain the same, the lower the price of a good, the smaller is the quantity supplied. However in this case, since the rebate of RM200 is given by the government, it will not affect the price of the smartphones hence the quantity supplied will not be affected. Still, dealers are said to be the one who take advantage of the rebate mechanism the most, as they are the one who profit the most. For the benefited consumers, they will have to incur an amount of money for them to take advantage of the rebate mechanism. This rebate will somehow force the youths to make the purchase of smartphone now rather than after the rebate mechanism is expired. Hence, dealers will see an increase in sales of smartphones in near future after the implementation. This will then lead to an increase in quantity supplied of smartphones.

The next issue to discuss is the price elasticity of demand which is a units free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. Smartphone generally is an elastic demand as it is not a necessity but it is an expensive goods. It is a luxury compared to normal mobile phones. Therefore, the rebate may encourage people in getting a smartphone since they can purchase one with a cheaper price.

The total revenue from the sale of a good equals the price of the good multiplied by the quantity sold. When a price changes, total revenue also changes. Smartphone has an elastic demand, hence a one percent price cut increases the quantity sold by more than one percent and total revenue increases. Still, whether smartphone is a luxury or necessity depends on the level of income. For people with low income, smartphone can be a luxury but not for people with higher income. Although only people who earn up to RM3000 per month and aged between 21 to 30 is consider have a lower income, some of them may have extra pocket money given by their parents thus making smartphone no longer a luxury for them.

As a conclusion, once smartphone rebate mechanism is implemented, the youth who earn up to RM3000 per month will cause an increase in quantity demand for smartphone. As the quantity demanded for smartphone increase, quantity supplied for smartphone by the dealers may also increase. However, due to the changing lifestyle of the current generation nowadays, smartphone may become a necessity rather a luxury.

Trending of Serviced Apartments

Attractive condominium homes that are on high demand nowadays. 

According to Oriental Realty’s report posted in Star Property entitled 'Condo Homes on the Rise in KL', it is stated that 43% of the total residential units developed are condominium homes. This may be due to the scarcity of the land and resources to build large unit houses such as bungalow and semi-detached house. Thus, the developers try to maximize their profit by building condominium. Investors will also search for potential condominium units so that they can earn through renting out their units or selling them to another buyer. On top of that, people nowadays tend to lead a hectic lifestyle. Maintenance of homes tend to be easier with condominium. Besides, staying in a condominium tends to be more attractive as condominiums usually provide more facilities such as gym center and swimming pool. According to the report, the highest percentage gain by house type in the Batu district is serviced apartment, which has proven high demand for it compared to low cost flat and others in that district. Thus it is necessary to evaluate the effect of such high percentage gain in that particular market.

There is no doubt that a home or shelter is a necessity. However, condominium units tend to be expensive. The law of demand states that when other things remain the same, such as the level of income, the higher the price of a good, the smaller is the quantity demanded. Condominium, especially serviced apartments tend to be expensive when newly built. It is also not a good investment object as in the long run, a condominium is not an ideal place to raise family with children due to the space constrain and the lack of privacy. Moreover, as time goes by, more condominium will be built. People will normally opt for a newer and better looking unit rather than choosing older serviced apartments. In short, more substitutes will exist in market causing the increase of opportunity cost in the older serviced apartments. This will lead to a decrease in price for the owners’ unit and investor will no longer profit that much during sales of their apartments. They may even suffered loss from the sales itself. Therefore, as quantity available increases, the marginal benefit of each additional unit falls and the highest price that someone is willing and able to pay also falls along the demand curve. This principle can also be seen to be reflected in the serviced apartments in the Batu district itself.

Next, the law of supply states that when other things remain the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied. For the developers, it is never worth building houses when the houses built do not at least cover the marginal cost of developing it. Therefore, Batu district has an increase in serviced apartments as they have to increase production in order to cover the marginal cost of developing condominiums. Serviced condominiums are normally bought over by people with good financial background. Thus, there will eventually be surplus of serviced apartments as the longer the serviced apartment is built, the more substitutes it has and the price of serviced apartment will be reduced.

The price elasticity of demand is a unit free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. Serviced apartment has an elastic demand as it has many substitutes such as bungalow, semi-detached house, and newly built condominiums. This is because the greater the proportion of income spent on a good, the more elastic is the demand for it. Service apartments are more expensive and less investment worthy compared to houses thus there is no argument against the statement that serviced apartment has an elastic demand. Moreover, one particular serviced apartment has many substitutes – the newly built apartments. For shelter, people may prefer to invest RM1 million for example in a smaller house than a serviced apartment.   

Thirdly, with an increasing units of serviced apartments, more foreigners and people from other districts and states will began coming in to the Batu district in Kuala Lumpur for job hunting as there are more residential units available for singles and couples. This will lead to an increase in quantity demanded for vehicles as it is impossible to go anywhere without a vehicle or public transportation. With more population in that district, there will also be an increase in quantity demand and supply for necessities such as oil for automobiles, food and so on. This will also cause investors into believing that it is worthy to invest in serviced apartments because more people are coming to that area for studies and work hence increasing demand for rental units. Quantity supply for the apartments will then eventually increases. Lastly, the increasing demand in serviced apartments will also lead to more labor forces needed in order to supply more apartments. The price of materials needed to build condominiums will also increase such as cements, bricks, sand, glass, steel and so on, leading to an increase of quantity supplied for the materials.

Facilities provided in a luxury condominium. Just like a resort isn't it? 

As a conclusion, the increasing units of serviced apartments in the Batu district may causes many increase in quantity demand in many areas. However, resource will need to be allocate efficiently and effectively as it is limited, with the land being scarce as well. Thus, it is interesting to see that the increase of residential units alone can results in many changes in the microeconomic aspect. 

Era Of Property Glut?

Too Many Houses?

Based on the article from The Star Online entitled ’Housing Supply And Demand – Are We Nearing An Equilibrium?’ written on 26^th November 2011, consumers and developers are constantly trying to reach the point where demand equals to supply. However, this proves to be a difficult task for both sides of the market with the many different factors continuously causing fluctuations in the demand and supply of houses.

The law of demand states that when other things remain the same, the higher the price of a good, the smaller the quantity demanded; and the lower the price of a good the greater the quantity demanded. With the rising prices of land across the nation, consumers are finding it more difficult to own a piece of property and thus bringing the quantity of houses demanded down. The reason behind this occurrence is the income effect. When the price of a good or service rises relative to income, people are unable to afford all the things they previously bought, hence the quantity demanded of the good or service will decrease. In this case, faced with the rising prices of property and an unchanged income, consumers are finding it impossible to come up with funds to buy their own house and altogether decreasing quantity of houses demanded.

The law of supply states that when other things remain the same, the higher the price of a good, the greater the quantity supplied; and the lower the price of the good, the smaller the quantity supplied. With houses being an asset which will only appreciate in price for years to come, developers are constantly working on new housing projects in hopes of raking in larger profits. However, if this phenomenon continues, the quantity of houses supplied will exceed the quantity demanded which results in a surplus of houses. When there is a surplus of houses, developers may be forced to bring down the prices of these houses to eliminate the excess supply especially if the houses are built in non-urban areas.

The changes in demand refer to any factor that influences the buying plans, other than the price of the good. In addition to that, the changes in demand for houses are widely determined by factors such as expected future prices, income, expected future income and credit, population as well as consumer’s preferences. Houses are an asset with high expected future price, hence consumers would try to acquire a piece of property as soon as possible before the cost of obtaining it increases. Also, by making the purchase now, consumers are subjected to lower opportunity cost than if they were to make the purchase in the future where prices are higher.

Income also plays an important role in the demand for houses. When a consumer’s income increases, he or she would tend to buy more goods; and when income decreases, he or she would tend to buy less goods. With houses being a normal good in which demand increases as income increases, consumers with a raise in income will be more capable in purchasing a house as compared to consumers who did not receive a raise or lose their job. Expected future income and credit also influence the demand for houses. Consumers who predict an increase in their future income or when credit becomes easier to get, they would demand for more houses to invest in.

Besides that, the demand for houses is also hugely affected by the size and age structure of the population. Pursuant to the article, the total population is expected to rise as time goes by and 65% of that population consists individuals below the age of 35 whom are looking to invest in a piece of property for their own future. With that in mind, the demand for houses will continue to increase with time. Also, demand relies on preferences. Preferences are the value that people place on various goods and services. So, if consumers prefer to have their own houses instead of living their parents for example, the demand for houses will continue to surge.

On the other hand, the changes in supply refer to any factor that influences the selling plans, other than the price of the good. The changes in supply for houses are broadly influenced by the prices of factors of production, the number of suppliers in the market, technology and the state of nature. In order to build houses, developers need resources such as cement, bricks and human labor. These resources are known as factors of production, thus when their prices increase developers will cut back on the amount of houses built and supplied to the market. The number of suppliers in the market also plays in a role in the supply of houses. With the current number of property developers as well as new and emerging ones, the number of houses built will be more and supply will very likely increase dramatically.

In addition to that, the current state of technology also determines the supply of houses in the market. To be in line with the nation’s goal to be a developed country by the year 2020, the government has introduced various new ways to lower the cost for developers whom are building new properties. This includes the usage of more machinery during the building stage and also the employment of more foreign workers to aid in the process as they provide cheaper labor. With these implementations, the supply in the housing market is expected to rise. Lastly, the state of nature which comprises of all the natural forces that influence production also plays a part in influencing the supply of houses. For instance, in good weather where the sun is shining and there is minimal rain downpour, developers are able to construct more units of houses and thus increase the supply in the housing market.

In conclusion, with the way the market is heading, they would most likely be an excess of supply over demand. This is a result, of the country’s vision to achieve the status of a developed country by the year 2020. Hence, the government is trying encourage more development by building more properties for the society. Therefore, it is also the responsibility of the government to come up with some form of subsidiary to ensure that the prices of these properties can be afforded by the majority of consumers to avoid a prolonged surplus of houses.

Stretching The Ringgit

Based on the article from The Star Online entitled ’20 Items Under Price Control Scheme’ written on 3^rd August 2012, the government has enforced a price ceiling on a few highly demanded food items during Hari Raya Aidilfitri. Some of these items include chicken, beef, eggs, cabbage and onions which are needed in large amounts by every household celebrating this festival. The government chooses to implement this procedure to prevent suppliers from taking advantage of the high demand of their products from consumers by raising the price of these products to exorbitant amounts. This regulation also ensures that consumers are able to afford these essential products for Hari Raya without paying an arm and a leg for it.

A price ceiling or a price cap is defined as a government regulation that makes it illegal to charge a price higher than a specified level. A price ceiling is normally imposed when the price of a certain good or service is too high, which results in the majority of consumers losing their purchasing power. The sudden price hike in these products or services could be due to inflation or the increase in quantity demanded by consumers. Therefore, when this happens the government would intervene and impose a price ceiling on that particular good or service to ensure that consumers are once again able to purchase those products. The effects of a price ceiling on the economy vary depending on whether the price ceiling is above or below the equilibrium price. However, under normal circumstances, a price ceiling below the equilibrium will tend to have a larger impact towards the economy.

According to the article, due to the approaching festive season, the demand for a few popular items will increase. When this happens, a shortage will occur as quantity demanded will exceed quantity supplied. Hence, when there is only a small amount of a certain product left in the market, the highest price that consumers are willing and able to pay for once unit of that product will be higher. Some suppliers who are well aware of this phenomenon, would take advantage of the situation and deliberately decrease the amount supplied in the market just so that they would be able to take home a bigger profit. Therefore, the government is making a right decision to look after the well-being of consumers by implementing the price ceiling on these 20 popular items.

The law of demand states that when other things remain the same, the higher the price of a good, the smaller the quantity demanded; and the lower the price of a good the greater the quantity demanded. Thus, when the price cap is below the equilibrium price, consumers will increase their demand for that particular product. On the other hand, the law of supply states that when other things remain the same, the higher the price of a good, the greater the quantity supplied; and the lower the price of the good, the smaller the quantity supplied. Thus when the price cap is below the equilibrium price, suppliers will decrease the amount of that product supplied in the market.

Consequently, consumers are then forced to engage in search activity due to the shortage of these products in the market. The time spent looking for someone with whom to do business is called search activity. There are a few effects which come about from conducting search activities, this includes a lot of wasted time and resources trying to find alternatives to overcome the product shortage. Also, the opportunity cost of obtaining the good equals to the price and also the value of the search time spent on finding the good. Pursuant to the article, with the shortage of these few products during the festive season consumers are obliged to conduct search activity to try to find other alternatives to get obtain those products.

In addition to that, a price ceiling also encourages the existence of black markets where illegal trading occurs. A black market is defined as an illegal market in which the equilibrium price exceeds the price ceiling. When there is a shortage in the market, consumers would turn to any possible way to obtain the product they desire even if it includes making illegal purchases in black markets. Conversely, suppliers whom are well aware of the shortage in the market would take advantage of desperate consumers. They would make the product available to consumers only by charging them a ridiculous price which is way above the equilibrium and price ceiling. With reference to the article, the price cap imposed by the government might bring about the increase in black markets as suppliers find that to be the only way to attain a profit. Consumers are also willing to pay a higher price to obtain those goods as they are no longer available anywhere else other than in the black market.

In a nutshell, a price ceiling can lead to both positive as well as negative effects. The good part of a price ceiling is that consumers regain their rights in obtaining certain products at relevant prices instead of falling as victims to some suppliers who come up with schemes to raise the price of their goods to exorbitant amounts. While the consequences which come about from the enforcement of a price ceiling include a shortage in the market, an increase in search activity and the rise of black markets. Therefore, it is up to us as consumers to try to make the best out of these economic policies implemented by the government.

California Fuel Price Rises Force Pump Closures

        Based on the article from the BBC News US & Canada entitled 'California fuel price rises force pump closures' that written on 5th October, 2012 (http://www.bbc.co.uk/news/world-us-canada-19853740). A sharp rise in fuel prices in California linked to state supply shortages has forced some petrol stations to close temporarily. In one part of the Golden State, prices hit $5.69 a gallon (£0.91 per litre), $1.20 more than the California average. The average fuel prices in California have risen to $4.49 a gallon, becoming the nation's most expensive petrol.

        Due to this incident, the refinery had gone offline because of a power cut, exacerbating the supply problems. Fuel price spikes particularly affect the state's independent petrol station operators, who pay a higher price for their supplies than some national chains. As prices increased over the past week, the California Independent Oil Marketers Association requested a waiver from the state's air board requesting to use the so-called winter-blend before the scheduled 1 November switchover. Besides that, according to the American Automobile Association, petrol prices are still relatively high around the US, averaging $3.79 a  gallon, 39 cents higher than this time last year.

         According to the analysis made by the American Automobile Association, the rising of price for the petrol are relatively high compare to last year. California's record average gas price was $4.614 per regular gallon. According to AAA's Daily Fuel Gauge., that just barely edged out the previous record of $4.610 set in 2008. A rise in the price of petrol brings an increase in the quantity supplied along the supply curve. Petrol is a necessity and less inelastic good which means the demand of petrol will remain unchanged because people that drives car may need it in their normal daily life, no matter how was their income, so the increase of average income does not affect a lot in the demand for petrol. The demand of petrol will not affect, because price increases, only quantity demanded will change, but not demand of petrol. In the other hand, when the range of prices is lower the equilibrium price, shortage arise. Shortage is a situation where the quantity available or supplied in a market falls short of the quantity demanded or required at a given time or price.

         However, people that really could not afford the new fuel price will probably reduce the consumption of petrol. Consumers may reduce the consumption on petrol by driving 3 times in a week compare to the past where they are driving everyday. They may also choose to carpool with their colleagues or friends which stay in the same or nearby neighborhood in order to reduce the usage of petrol. On the other hand, some consumers might prefer to take public transport like bus and train compare to private transport. This will also cause the quantity demanded of petrol to be reduced in a very little amount. By that, the demand for public transport like train and bus will rose.

 Diagram 2.0 shows the movement along the curve from D0 to D1. The quantity demanded of fuel reduces  (From Q0 to Q1) because of  the fuel price increased (From P0 to P1).

                                                                Diagram 2.0

        Moreover, the rises of the petrol price shows the price elasticity of demand which means how quantity demand response to the changes of price (ceteris paribus). The price elasticity of demand means a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. The refinery had gone offline because of a power cut, exacerbating the supply problems means this situation is unit elastic demand which means total revenue remains unchanged.  The changes in price of petrol will possibly affect the supply of petrol. It means increase in demand and decrease in supply. An increase in demand and a decrease in supply raise the equilibrium price. The change in equilibrium quantity is uncertain because the increase in demand increases the equilibrium quantity and the decrease in supply decreases it.

        Some have closed down their pumps rather than cut into profit margins. Here comes the law of the demand that results from the substitution effect. When the opportunity costs of a good or services rises, people seek to substitute for it, so the quantity demanded of the good or services decrease. This means the price of the petrol rises, the quantity demanded for the petrol decreases.  This causes opportunity cost which means as we move down along the production possibilities frontier, we increase the price of petrol, but we can decrease the pumps. The opportunity cost of petrol is the pumps.

        Officials insisted California was not running out of petrol, and one refinery has already resumed production. This situation might cause by the economic growth which consist of two factors which is technologies change or capital accumulation. Price cap will cause petrol shortage. Due to the quantity demanded exceeds quantity supplied, the market is insufficient, hence it is the market failure. For this situation, quantity demand exceeds quantity supply. The maximum price on the black market will increase as well, because people will want to get the goods since supply is limited. Besides, it can be a short-run coast because it is an increase in the price of a factor of production increases costs and shift the cost curves.

        Due to the closures of pumps in California, the insufficient of supply occurs. When supplies decrease, price will increase and amount spent on people will also increase. If the price of the factor of production used to produce a good rises, the minimum price that a supplier is willing to accept for producing each quantity of that good rises. It will also cause income effect, we will feel poorer because of the increase of price of the fuel and our incomes are still remaining the same. The supply of petrol will increase because the government would like to earn more if they increase the price of petrol in our country. There will be an income outflow for this situation. When the outflow occurs, it will affect the economy stability. Government has to figure it out to stabilize the economy so that it will not cause inflation in the country.

Implementation of Community environmental legislation

        Based on the article from BBC News Business, entitled 'Power shortage risks by 2015, Ofgem warns' that written on 5th October, 2012 (http://ec.europa.eu/environment/legal/implementation_en.htm). Regarding to the article, we can see that Britain risks running out of energy generating capacity in he winter of 2015-16, according to the energy regulator Ofgem. Its report predicted that the amount of spare capacity could fall from 14% now to only 4% in three years. Therefore, this would leave Britain relying more on imported gas, which would make price rises more likely. 

        Besides that, Ofgem also blames the risk on coal-fired power stations being closed sooner than expected and EU environmental legislation. It comes three years after Ofgem's Project Discovery report, which warned that electricity shortages could lead to steep rises in energy bills. And for the unprecedented challenge, the regulator also says that more investment was needed in building fresh generating capacity. By the way, this report highlights that how imperative it is for the government to act now and introduce electricity market reform that ensures the programme of new nuclear build and other vital energy infrastructure projects, such as carbon capture and storage, are attractive enough to secure the long-term investment they require.

        Ofgem is the Office of the Gas and Electricity Markets. Protecting consumers is their first priority. They do this by promoting competition, wherever appropriate, and regulating the monopoly companies which run the gas and electricity networks. The interests of gas a which means if the expected future price of the energy rises, current demand for the energy increases and the demand curve will shift rightwards. It causes shortage therefore the price will increase in the future.   

Diagram 1.0 

        Moreover, the electricity is a necessity which peoples need to use it in order to continue their daily life activity. Therefore, electricity is an inelastic good; therefore the demand for electricity will have only little changes if the price rises. It is because no matter what happens, people still need to use it. For the price elasticity of demand, the closeness of substitutes occurs. As for the necessities, it generally has inelastic demand. Because the electricity almost do not have any substitute product that can replace it, so it is an inelastic good.

        The next situation in this article shows that when OfGem could not supply enough energy capacity to the people in U.K., they can only rely more on imported gas. They import gases from foreign countries causes the cost of production increase, therefore price of electricity will also increase. This will possibly cause the country money to outflow. The third situation that was mentioned in the article is about the coal-fired power stations expected to be close soon. It is because it against the EU environmental legislation, as the coal-fired power stations is harmful to the environment (European Commissions 2012). In the past 30 years the EU has adopted a substantial and diverse range of environmental measures aimed at improving the quality of the environment for European citizens and providing them with a high quality of life. Thus, the situation above had caused opportunity cost to occur. Opportunity cost is the second best thing that you need to give up in order to produce the best thing. For example, if an asset is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used. For instance, the Government only have RM1million and have two plans to implement which are building a public school and a public hospital. Both two implementations will benefits the people. If the government chose to build the government school, the hospital is the opportunity cost in this case. So, closing the coal-fired power station is the opportunity cost of having good environmental condition in England. Besides that, if the government close the coal-fired station down, the supply of electricity will decline, hence shortage of electricity may happens which will lead to rise in price. When there is shortage, means there is underproduction and the economic is inefficient. By the way, it will cause deadweight loss. Deadweight loss can be equal to the social loss. A deadweight loss equals the decrease in total surplus.

        If the market do not achieve at the market equilibrium, hence it is a market failure. ‘The Invisible Hand’ which is a natural forces which will push the market to self-regulate when a competition occurs, and it will also lead to improvement, so market will be efficient automatically. 

        Lastly, we can see that more investment was needed by the British government in building fresh generating capacity. Also, if the programme of new nuclear was built and other vital energy infrastructure projects, such as carbon capture and storage, are attractive enough to secure the long-term investment they require. Hence, if OfGem got the new investment in building fresh generating capacity, the shortage problem can be solved which means supply increase, the price of the electricity falls. Moreover, if the OfGem able to launch the programme of new nuclear and other vital energy infrastructure projects, long-term investment they require is secure. Thus, the supply of the electricity will increase, the price will remain stable for long-term. These benefits the consumer, OfGem and government as well. Consumers better off, because they can enjoy a stable and lower price because of the enough of energy supply and no need to worry about the electricity shortage which will influence their daily life. OfGem and Government better off too, because they can solve the environmental pollution problem and they have now no problem to supply enough amount of electricity to the people. And they do not need to rely on the imported gas anymore, which will decrease the OfGem cost of production and the cash flow of the money that out to the country can be decreased as well.