There is getting more company outside
registered for green building and ready to spend on green building materials
for projects. The amounts spent on green building materials continue to rise
and it makes sense to go green. Through the article above, we can know that
Solar System Business is a monopolistic competition market in this century.
Although the number solar system company is getting higher, but it is still a
specific business and they continue doing it in their very own way. Green
Building index in Penang for the next two years is expected to hit around RM60
million to RM120 million. Some of the popular materials and energy-saving
products include solar panel which is built on the top of buildings and solar
water systems in houses.
Nowadays, most markets in the world are
emulative but they are not perfectly competition. It is due to the companies or
corporation in these markets have some power to set their prices, as monopolies
do. In the economics book, they called this type of market monopolistic
competition. Monopolistic competition is a market construction in which a large
number of companies compete while produce a differentiated item, companies
compete on the product price, quality, and marketing, lastly they are easy to
join or leave the market. In this situation, green buildings make sound
economic sense besides ecological and environmental sense. There are a lot of solar
system companies outside such as G-solar business, YongYang solar energy and so
on. If the demand of the solar system keeps on increasing, there will be more
solar system companies joining into the market. In this year, those companies
have sold about 40ft containers of solar system materials with a net worth of
RM500, 000. They are expected to sell 10 more 40ft containers with a net worth
of RM2 million in the following year.
In this market, each company has a
limited capability to affect the price of its products or items. Due to the
average price in the market, each company only can increase their price by a
small amount. Besides, some of the individual home owners prefer to use the
solar system for their property. This makes the demand of the solar system
rises. When the demand is getting higher, producers would like to fix a higher
price. However, the number of companies in monopolistic competition is huge, it
is not possible for them to coordinate and discuss about the price. On the
other hand, a company in this market, must be tacful to the average price on
the market, but all of the companies in the market is rather small. It means
that no one company can affect the market condition. They might not have power
to influence the market price or influence other companies’ actions. When one
of the companies increases the price of solar panel by a large amount,
consumers will search for other types of products that they willing to buy.
When this happen, that company will sell less products and they have to pull
down the price to the market price but they won’t disappear unless they
increase the price by a large amount. If they don’t lower down the price, they
might be eliminated from the market because individual company will never have
the power to influence the price in monopolistic competition market.
In addition, the article showed
developers who do meet the Green Building Index (GBI) requirements have to pay
development charges of RM15 per square ft and RM20 per square ft for the
residential and commercial projects respectively. Penang is listed third in
Malaysia in terms of the number of solar system projects registered with GBI,
right after Kuala Lumpur and Selangor and ahead of Putrajaya. There are also
many producers and developers that are not applying for the GBI certification.
When consumers plan to buy or apply solar panels for their property, they might
choose those companies who do meet the requirement. It is because reliability
is one of the very important things considered in the quality part. Some
developers might offer a cheaper solar panel but it is low quality and not
reliable. In this situation, consumers will choose the better-quality solar
panel rather than those which are not applying for GBI certification although
it will be more expensive. Moreover, service is another important thing. Producer
or developers who provide efficient services and make sure their customers
receive the products quick will be a better company in monopolistic competition
market. These companies might can survive in the market for a longer period.
Because
of the product differentiation, a company in the monopolistic must market its
product. There are 2 main styles to market their product which are advertising
and packaging. A better advertisement and package for the products can persuade
more buyers that the quality of the product is higher. In this case, buyers
feel satisfied to buy their product. On the other side of the coin, a low
quality developer persuades buyers come to purchase their products with a lower
price although the quality is lower. Solar system companies do so. Each solar
system company or corporation must market its product by using creative
advertising and the product produced must be nicely packaged. It can show their
product is high-quality and enough functional for consumers to use in daily
life.
In conclusion, Monopolistic competition
has no obstacles to prohibit new companies from joining the market in the long
run. Therefore, a company in monopolistic competition cannot make a economic
profit in the long run. When a company in the market make a economic profit,
new company found it profitable and join the industry. Those entry lower the
prices and wipe out the economic profit. At the end, the economic profits
eliminated. However, when some of the companies sustain economic loss, they
started to leave the industry. These exit increase back the prices and clear
away the economic loss. In the long run equilibrium, the companies in the
market make zero economic profit.
Thank you for this great read!! I definitely enjoyed every little bit of it and I have you bookmarked to check out new stuff you post.
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