Question Ii (chapter: 28.3} Read the newspaper article below and answer the questions. The New Straits Times June 14, 2022 Give space for market forces to restore balance between supply and demand KUALA LUMPUR: The best way to curb price hike of food items is to allow market forces to restore balance between supply and demand, a prominent economist said today. Centre for Market Education chief executive ofcer Dr Carmelo Ferlito said the current spike in prices would eventually cause producers to step up the supply of food items. The increase in supply, in tum, will bring down the prices. However. he wamed that the govemment's decision to introduce a moving ceiling price for food items could potentially rattle the supply chain and worsen the supply crunch. "in the rst place. it is important to recogujse that the government creates the discrepancy between supply and demand, which has led to food insecurity. by introducing Iockdowns. "The government's monetary expansion and imprudent expansive scal policy has also led to ination. So. they cannot play the reghter role now aer breaking the eggs. "We need to accept a period of high prices to get the supply to converge with demand and bring prices down. This is unavoidable. "The price ceilings and export bans that are currently in place will only prolong the problem. This will only discourage producers to raise the supply. and therefore, once these measures are removed. prices of food items will skyrocket again. "As such. we need to remove all the obstacles for producers to step up supply and strengthen international trade." he told the New Straits Times. Can'nelo raised these concerns following Prime Minister Datuk Seri Ismail Sabri Yaakob's statement on Monday. saying that the Economic Action Council [EAC had agreed to introduce a moving ceiling price for food items. This, he said, meant that the ceiling price of food items would be adjusted based on changes in the price oivalious inputs in the supply chain. However. Carmelo warned that these decisions could make Malaysia a "Soviet-style country". where prices xed by the government, disregarding the market forces could lead to an economic collapse. The prices of food items, he said, were not determined by production costs, but rather through the interaction of supplydemand in the market "Prices are interconnected: consumption and production decisions are based on relative prices and prot expectations. "If some ofthe prices are not determined by the market. they do not reect the actual structure of demand and supply and could potentially lead to wrong production decisions. "Real prices corresponding to the structure of supply and demand mg in the market and not via costs. "Govemmentlixed prices are not prices at all. they are just arbitrary gures. These articial prices can potentially bring wrong products at wrong prices into the market. compromising the entire economic system. "This means that the economic system will be ooded with products that are not in demand (wasted resources), while there may be shortage of what the market is asking for," he added. Queson a. Sketch an example of price ceiling differentiating market price and price ceiling. [4 marks) b. What is the purpose of the government when introducing price ceiling? [4 marks) c. What is the main argument of the CEO onEIJLEEfor Market Education? [6 marks) d. In your opinion. what should the government do? .iustiiy. [6 markJi