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Economics Tuition


Grasp Economic concepts well in interactive ways

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Economics Focus is committed to provide you with a meaningful and exam-oriented learning experience in our economics tuition, such that you are well-versed and proficient in the study of Economics. In addition to the primary goal of attaining academic success at the O and A Level Economics Examinations. We also believe that students should learn with the aim of developing critical thinking and problem-solving skills that are highly valued in higher levels of education and in various specializations of work. We have created an effective economics tuition that builds the knowledge, nurtures the right skills and develops the study framework to poise students for academic excellence in this subjects for both GCE O and A level examinations.

Economics Tuition – A Level Essays Preparation

List of questions to practice for GCE A level examination for 2017 Examination to be taught in our economics tuition


Please do essay outlines for the following questions and write out one or two essays in full. The answers to these questions will be given later and you will be informed.

Essay Question 1
Consider different forms of market failure in Singapore and evaluate their significance for the efficient working of the economy. [25]

Essay Question 2
Resources are used to produce bottles for the water industry. Around the world, campaigns to ban bottled water are under way as consumers become aware of the environmental and economic costs involved. Discuss if a ban on bottled water is the best way to reduce the environmental and economic costs involved. [25]

Essay Question 3
“Oligopoly is the best market structure that is able to achieve efficiency, equity and innovation.” [25]

Essay Question 4
Discuss the usefulness of the elasticity concepts of demand to a designer coffee retailer such as Starbucks. [13]

Essay Question 5
Discuss the extent to which the trend toward globalization, rather than domestic factors, contributes to a persistent balance of payment deficit in an economy. [25]

Essay question 6
Since its accession to the World Trade Organization in 2001, China has carried out major trade and trade-related reforms. More than half of China’s exports are produced by foreign invested enterprises. (FIEs) who account for a particularly large share of exports of high technology products. FIEs enjoy various tax advantages over domestic enterprise.

Explain if the pattern of China’s exports is consistent with the theory of comparative advantage. [15]

Essay Question 7
‘Singapore’s unemployment rates have been ranging from 3.4% to 2.1% while inflation rate was around 2.1% to 0.5% from 2004 to 2007. However, inflation rate shot up 7.5% while unemployment rate hovered at 2.3% for the first half of 2008.’ – By Singapore Department of Statistics

Explain why low unemployment and inflation rates are aims of any government and discuss whether the Singapore government should be concerned over the above-mentioned scenarios. [25]

Essay Question 8
The unemployment rate in Singapore increased from 2.7 per cent in 2001 to 4.2 per cent in 2005. To what extent could a shift from direct tax to indirect tax reduce unemployment in Singapore? [15]

Economics Tuition – Areas of Study

Chapters to study for exam in 2017 GCE A level for economics tuition by Economics Focus


Please take note of the proposed areas of learning. As long as you know what is needed in the study, please skip to the next areas. If you cannot understand the concepts, please call JC Economics Tutor Simon Ng. Remember how we set perspectives, the manner of elaboration and diagram illustrations and the way you write your economic causation as taught during our economics tuition.

1) Demand and Supply
– Changes in the variables such as economic prosperity, taste and preference, government policies and rise in cost of production and its impact on related markets (types of demand and supply – impact on price, qty, total expenditure and consumer surplus and producer surplus
– (Diagram must consider price elasticity of supply and demand)
– Price ceiling and floor price, minimum wages and its impact on standard of living

2) Market Structures and Cost of Production
– How globalization affects the firms’ profitability (affect revenue and cost of production)
– Reasons for merger and acquisition (seen from the firm, society, consumers)
– Analyze why the government should regulate firms with high degree of market power or not
(Based on allocative efficiency, production efficiency, dynamic efficiency, capacity for EOS, how it affects the society)
– Differences between collusive and non-collusive oligopoly and how firms will compete in the oligopolistic forms of market structure
– Reasons for the regulation of monopoly and ways to regulate
– Price discrimination (forms, conditions for price discrimination, benefits and detriments

3) Market Failures
– How globalization creates forms of market failures
– How imperfect market conditions lead to market failures (3 forms)
– Government solutions to solve market failures (market and non-market solutions
(must know the process) and its limitations
– Factors affecting the choice of solutions for market failures
– Reasons for government intervention and government failures
– Which forms of market failures will government regulate most
– Reasons for and against government provide merit goods
– Reasons for and against government provide free merit goods
– Reasons for and against government provide public goods

4) AS-AD Model / NIA / SOL
– How globalization affects SOL
– How different policies affect current and future SOL
– How balance of payment explains whether the SOL of a country has improved
– How indicators can be used to measure SOL
– Factors affecting the government’s capabilities to raise SOL

5) Unemployment and Policies
– Explain how globalization affects unemployment
– Explain and evaluate how protectionism will solve unemployment
– How the development of an international sporting events solve different types unemployment
– How different policies are used to solve the problems of globalization
– Factors affecting the government capabilities to solve unemployment
– Factors affecting the government in the choices of economic policies

6) Protectionism/ Globalization / Balance of Trade / Pattern of Trade
– Explain how globalization will affect pattern of trade
– Explain the domestic and international factors that affect BOP
– Explain how balance of trade deficit can be solved
– Explain how balance of payment indicates economic performance of a country
– Explain how globalization affects the BOP of a country
– Explain how demand and supply theory explain pattern of trade
– Explain how the concept of CA explains pattern of trade
– Explain how globalization affects the pattern of trade
– Explain the features of globalization and how it affects issues (micro and macro)
– Consider the factors that will affect the pattern of trade
– Why some countries can reap the benefits of globalization better than other countries

Economics Tuition – Outlines

The following contains the essay outlines for the practice session.


Essay Question 1
Consider different forms of market failure in Singapore and evaluate their significance for the efficient working of the economy. [25]

Introduction
– Definition of market failures – failures of the price mechanism to conduct efficient resource allocation, implying that there is maximization of net social benefit gain when there is no government intervention.
– State that the main causes of market failures can be seen in terms of the presence of positive and negative externalities, imperfect market information, absence of public goods or the condition of unequal distribution of income and wealth. These causes of market failures will lead to partial or complete loss of welfare. The loss of these welfare is of great economic significance to the country as it will undermine the efficiency of the working economy

Main Body
1. Explain how various forms of market failures occur
One of the causes of market failures is due to the absence of public goods which will lead to complete of loss of welfare when problem of free ridership arises. Private sectors are unwilling to produce public good despite the need of a growing population as there is problem of free-ridership, implying that the producers cannot charge the non-payee, thus reducing the profit incentive to produce the public good. Free-ridership occurs because public goods are non-excludable and non-rival. When consumption is non-excludable, non-payee cannot be denied the consumption, allowing the opportunity to for the non-payee to free-ride. As for non-rival, it implies that the consumption of the good by one consumer will not deny any consumer to consume the good, allowing sharing and thus, it facilitates free-ridership. This can be seen from the lack of public facilities like drainage system which will lead to the rise of flooding incidents. Consequently, free-ridership will occur and there is absence of the provision of public good and this is the source of market failure.

Besides, there will be higher degree of negative externalities created by over-consumption or overproduction. Traffic congestion in Singapore is frequent and it is one form of negative externality which will lead to a rise in external cost seen in term of higher cost of travelling. This will lead to overproduction or over-consumption as the market equilibrium without the external cost will be below the social equilibrium where external cost is considered. Consequently, the society will incur the welfare loss, seen in terms of low productivity which will reduce investment and dampen economic growth.

There is also the problem of positive externality which will occur when the industry is under-consuming merit good. Globalization promotes higher degree of competition in the global economy and there is a greater need for training and development for Singapore workers which will provide positive externality like higher efficiency which will raise the competitiveness of the economy. However, the society may ignore the need for training and there will be under-consumption and this will mean that the level of training in the society will be below the social optimal level. This is so as the consumption at market equilibrium fails to consider the external benefit like higher productivity or lower cost of production where the production is below social equilibrium level of consumption which will include the external benefit. Consequently, there will be welfare loss as the society fails to reap the external benefit at higher production level due to under-consumption of training and development programmes.

There is also a condition of imperfect market condition which will warrant more market dominance as more international firms invest or when there are more big firms due to mergers and acquisition in Singapore. These firms are well-known and have greater control of the market demand as seen in Apple and Samsung which can set higher price or output to their advantage. Consequently, the firm will under-produce at the level where market equilibrium which is based on profit maximization (MC=MR) is below the social equilibrium level (P=MC) and this will give rise to welfare loss seen in terms of lower consumer or producer surplus.

Lastly, unequal distribution of income and wealth will also occur from globalization which will contribute to market failures. Structural unemployment and global rising prices will raise the wealth of the rich while it lowers the purchasing power of the poor. This will lead to market failure as the net social benefit gain will be unequally distributed among the population and thus, the lower income group’s consumer welfare will be undermined, indicating that the society is experiencing welfare loss for some people.

2. Explain why these market failures are of economic significance as seen in term of the adverse impacts they have on the economy
a. The impact of the deadweight loss created by positive externalities
Significance:
The loss of welfare has significant repercussion on the economy as seen in terms of lower productivity which can affect the competitiveness of the economy.
The presence of positive externalities will incur government expenditure as there is a need for the government to provide subsidies to induce consumption and production and to fund the provision of merit good by the government to solve under-consumption or production. Therefore, this will be a significant impact as it may cause budget strain and public debt.

b. The impact of the deadweight loss created by negative externalities
– Welfare loss seen in terms of the effects of smoking on the society is costly and has long term impact on the society
– Can provide tax revenue to the government but it may invite more political protest which the government must take note.

c. The impact of the deadweight loss created by imperfect market condition
– Problems of consumer exploitation – decrease consumer surplus – unfair to the consumers – need to protect the interests of the consumers – safety of the goods
– However, the government cannot excessively curb the market dominance as some industries need to have market power to gain benefits for the society like economies of scale and product innovation through R & D.
– High administrative cost and complexity in regulation

d. The impact of complete loss of welfare due to absence of public goods
– The impact is significant as it affects the whole society
– It also has extensive impact on the standard of living of the society as public goods serve to make life more convenient and comfortable for the citizens
– There public facilities are important in raising the productivity of the economy

e. The impact of uneven distribution of welfare due to unequal distribution of income and wealth
– Will contribute to social dissatisfaction and this will lead social unrest and instability
– The measures introduced to solve this issue will affect the budget and public debt and the incentive for work and economic growth

3. Assess the relative economic significance of these impacts – which form of adverse impacts would affect the economy extensively
Given the consideration of the significance of the various forms of market failures that Singapore will experience, the concern over the provision of public good is of greater priority. As for the forms of market failures, the government will only consider its impact when there is severe impact on our economic growth and development.

Conclusion

Essay Question 2
“Resources are used to produce bottles for the water industry. Around the world, campaigns to ban bottled water are under way as consumers become aware of the environmental and economic costs involved.” Discuss if a ban on bottled water is the best way to reduce the environmental and economic costs involved. [25]

Introduction
– State how the bottled water is seen as a demerit good with negative externalities that will contribute to a rise in external cost, resulting in market failure

Main Body
1) Explain how bottled water is a source of negative externalities that will lead to market failure
Negative Externalities: Dumping spread of diseases, contamination
-External Cost: Cost of environmental treatment, hospital expenditures
-DWL: Less funding available for other aspects of growth
(Economic Causation, Diagram and description of diagram)

2) Explain how banning of bottle water will solve the effect of negative externalities
-Eradicate usage, reduce the contamination – absence of negative externalities – Absence of negative externalities – No DWL/external cost

3) Evaluate whether banning is justifiable
Zero production – zero level of net social benefit gain – benefits seen in term of convenience, hygiene, development of water industry > cost of dumping and misuse of bottled water

4) Explain how other solutions can be introduced and why it is justifiable
– Use infrastructure/facilities to supply water by government – too costly
– Use bottled water – must encourage recycling and proper storage – maximise the use of bottled water without creating negative externalities

5) Evaluation of the issue
The use of bottled water is inevitable – complementary solutions to eliminate the negative externalities and maximize the net social benefit gain – public education and supporting facilities to ensure that there is no dumping

Essay Question 3
“Oligopoly is the best market structure that is able to achieve efficiency, equity and innovation.” [25]

Synopsis
Essay should include a comparison of the different market structures in the achievement of efficiency, equity and innovation and conclude which is the best market structure for each of the different features. It should be known that the no market structure type is able to achieve all 3 of efficiency, equity and innovation.

Introduction
Market structure is the interconnectedness of characteristics of a market such as the number and relative strength of consumers and producers, the degree and forms of competition, the extent of product differentiation and the ease of entry into and exit from the market. There are basically 4 types of market structures, namely, perfect competition, monopolistic competition, oligopoly and monopoly. Each type is unique and possess characteristics that are distinct and unique.

Main Body
Provide definition of market structure, oligopoly, efficiency particularly allocative efficiency equity, innovation

State the characteristics of different market structures.

To achieve Efficiency:
1. Define efficiency
– Productive efficiency – any point along the LAC – as such all market structure types are able to achieve this form of efficiency in the LR. However in the SR only PC can achieve this.
– Allocative efficiency – achieved when P=MC – all are not able to achieve this except for the PC firm and the firms who are welfare maximising, diagrams
– The oligopolist thus would not be the best producer in this area of efficiency unless he is a welfare maximiser.
– The extent of ability to set P>MC lowered for the MC firm as compared to Oligopoly who has a higher degree of allocative inefficiency

To achieve Equity:
2. Define equity – relations and perceptions of fairness in distribution of resources, providing for the needs of the lower income group
– PC markets with their characteristics of perfect knowledge, no barriers to entry, identical product and the perfectly elastic demand curve is able to achieve equity of profits in the LR through normal profits earned by their firms.
– All firms in the SR are able to earn supernormal, normal or subnormal profits depending on their ability to manage their costs. Equity of profits can thus be achieved and enjoyed in the LR only by PC and MC markets.
– Equity is also seen in third degree price discrimination when the market with PED>1 (lower income group) is charged lesser. Or government regulation for provision of class C wards in hospitals.
– Cross subsidization by the richer consumers for the poorer consumers.

To achieve Innovation:
3. Define innovation – is the application of new solutions that meet new requirements, inarticulate needs, or existing market needs. This is accomplished through more effective products, processes, services, technologies, or ideas that are readily available to markets, governments and society.
– Ability to innovate – the larger the firm size, the greater the ability and capacity of the firm to engage in R&D that will lead to the firms’ effectiveness and efficiency to innovate. Thus the oligopolist would be most innovative as compared to the MC or monopolist.
– Ability of the oligopoly to earn supernormal profits gives incentive for them to undertake R&D and innovate.
– Oligopolies have the following merits – ability to gain EOS, greater productivity/output, price rigidity and non-price competition – these encourage innovation so as to ensure its profitability and market share. Due to the small number of firms in the industry, R&D and innovation is necessary to keep abreast and capture new markets. High BTE allows innovative actions to have more long lasting effects on profits and market share. Unlike those of MC where BTE are low, innovations could be easily copied and improved upon, rendering expenditures on R&D not profitable and ineffective.

Oligopolies have flaws thus is not the best structure that possess all features of efficiency, equity and innovation in comparison with the other market structural types – it is not allocative efficiency due to market imperfections, presence of market power results in oligopolist’s ability to transfer consumers’ surplus to producers’ surplus thus worsening equity.

Comparison with PC
– Efficiency – PC firms are allocative and productive efficient due to the perfectly elastic demand curve of the PC firm where P=MC when the firm profit maximises.
– Equity – PC firm promotes equity as they all earn normal profits in the LR due to no BTE
– Innovation – PC firms lack ability and incentive to engage in innovation and R&D due to characteristic of perfect knowledge

Economics Tuition - Table Q3

*AII firms have productive efficiency as they produce on a point on their LRAC in the LR, unless they are complacent and there is x-inefficiency (like in monopoly or some oligopoly)

Conclusion
In sum, there is no best market structure that possesses all criteria – criteria statement and focus is thus important so as to help decide which should be the best type of market structure for that particular criteria type.

Essay Question 4
Discuss the usefulness of the elasticity concepts of demand to a designer coffee retailer such as Starbucks. [13]

Introduction
– (Definition of elasticity of demand/ state that the info is used to set price and business strategy to raise total revenue)
– Concepts of elasticity of demand measures the responsiveness of change in quantity demanded in relation to the change in variables such as the price of good itself, the price of the related goods (substitute or complement) or the income of the consumers. These concepts are useful to designer coffee supplier like Starbucks, as they provide information about the consumers and the competitive market which would help retailers to derive appropriate price and market strategy to increase total revenue.

Main Body
1) Definition of PED, state how it is used to increase total revenue, state the situation of PED – whether it is price elastic and price inelastic

For price-elasticity of demand (PED), it measures the responsiveness of the change in quantity of Starbucks designer coffee in relation to the change in price of Starbucks designer coffee. This information is useful to Starbucks as it can help them to derive price strategy. When the demand is price-inelastic, the percentage change in quantity demanded of coffee would be less than proportionate to the percentage change in price of Starbucks’s coffee. This would influence Starbucks to increase price for the coffee as it could raise the total revenue since the gain in revenue due to increase in price would be greater than the loss in revenue due to reduction in quantity demanded. On the other hand, if demand for Starbucks coffee is price-elastic, it implies that the percentage change in quantity demanded is greater than the percentage change in the price of the Starbucks. This will explain why Starbucks will lower price of the Starbucks coffee as the total revenue will increase since the gain in revenue due to increase in quantity demanded is greater than the loss in revenue due to a reduction in the price of Starbucks drink.
(reasons for why Starbucks coffee is price elastic or price inelastic)

For Starbucks, the demand for the coffee is price-inelastic during the weekends as the consumers have a high degree of necessity of demand since they view Starbucks outlets as an essential location for gatherings and leisure. Furthermore, the consumers are usually adults who have a high income and the proportion of income spent on the good is small, implying that the consumer is price-insensitive and thus, the demand is more price-inelastic. As for weekdays, the demand for Starbucks coffee is price-elastic as the consumers have a low degree of necessity of demand since most consumers are students and they may choose other places to spend their consumption on leisure drinks. Furthermore, the consumers are students who have a large proportion of income spent on the goods which mean that the consumers are price-sensitive and thus, the demand is price-elastic.

Availability of substitutes , proportion of income spent on it, time period for consideration for purchase

Economics Tuition - Table Q4

As seen from diagram 1, the reduction in price from P0 to P1 will lead to a more than proportional increase in quantity demanded from Q0 to Q1 which will raise the total revenue. As for diagram 2, the increase in price from P0 to P1, will lead to a more than proportional reduction in quantity demanded from Q0 to Q which will also increase the total revenue.

2) Definition X-elasticity of demand, usefulness
As for cross-elasticity of demand (XED), it measures the responsiveness of change in quantity demanded of the Starbucks coffee in relation to the change in price of other related goods, either substitutes or complements. This concept is useful as it can help Starbucks in formulating price and marketing strategy in relation to the competitive market. If the value of the XED with the related good is negative and large, the good is said to be a complement and is highly related. In this situation, Starbucks can conduct joint promotion or bundle sales to raise the demand for Starbucks coffee and other related products which will raise the total revenue for Starbucks.

3) Reasons for how the related goods are classified to help to derive business plan
If the value of XED with the related good is positive and large, the good related to Starbucks is a substitute as the good is in a competitive market. In this case, Starbucks will conduct price reduction in the short run to raise the price competitiveness of Starbucks in this market to prevent the loss of customers when there is intense competition and capture more consumers for Starbucks so as to raise total revenue. However, in the long run, Starbucks may need to resort to product differentiation through branding and advertising to reduce the market competition, shaping the product to become price-inelastic, which will enable Starbucks to raise price and avoid price competition. This will help Starbucks to raise total revenue despite the presence of a competitive market.

4) Definition of Income-elasticity of demand. uses of the concept to raise total revenue
As for income elasticity of demand (YED), it measures the responsiveness of change in quantity demanded in relation to the change in the income level. The income elasticity of demand is useful in helping Starbucks on how to conduct their product classification in relation to the change in income which is affected by economic growth. It is also helpful to Starbucks in the formulation of discount package to increase the total revenue.

As the income elasticity of demand for Starbucks is considered normal or luxury since the proportion in income spent on the good occupies a large proportion of income for most consumers. When income falls due to an economic recession, the demand for normal or luxury goods like Starbucks will decrease. Thus, it is imperative that Starbucks needs to devise an inferior product like regular coffee to suit the demand for inferior good where there is a fall in income. Starbucks may introduce discount package for students who are price sensitive since the coffee of Starbucks occupies a large proportion of their income. This will ensure Starbucks can retain their demand and thus sustain the total revenue.

5) Explain the limitations of elasticity of demand
– Magnitude of the value of PED and PES will vary as time span is longer
– Ceteris paribus condition is not possible in reality, and thus, the complexity of the economic environment will affect the value PED and PES simultaneously
– Social variables will distort the implication of the value of PED as the consumer with similar proportion of income spent on a good will have different response to change in quantity demanded because of their family background
– Concepts of elasticity cannot account for social variables which will distort the value (e.g. marriage status will distort price sensitivity), as concept of elasticity of dd/ss is a general concept

Conclusion
In sum, the three concepts of elasticity of demand are useful in helping Starbucks to raise total revenue as they provide information in derivation of price and market strategy. However, these concepts are linked under certain circumstances as it is difficult to consider the application under ceteris paribus condition in the real world. The data would not be applicable when it applies over a longer time span. Lastly, the three concepts are economic concepts which will not take in the consideration of social variables like family background which will distort the degree of price sensitivity of the demand.

Essay Question 5
Discuss the extent to which the trend toward globalization, rather than domestic factors, contributes to a persistent balance of payment deficit in an economy. [25]

Introduction
Globalization involves the integration of economic activities among different economic activities in the areas of trades, flow of investment, flow of fund and mobility of resources. As for balance of payment deficit, it occurs when the outflow of currency due to trade, investment and flow of funds exceeds the inflow. Although globalization has an influence on the balance of payment deficit, domestic factors will also contribute to the balance of payment deficit.

Main Body
Explain why balance of payment deficit will occur due to domestic factors
Lack of resources inducing a high degree of reliance on imports or failure to actualize local production to replace imports (e.g. Philippines)

Acceleration of economic development inducing the need of extensive import of resources and capital equipment, which will further lead to higher rate of economic growth  import of more luxury goods which are high-valued, contributing to current account deficit and then balance of payment deficit(The reliance on foreign workers will induce the outflow of transfer balance).

Inflation rate will make local goods more expensive and imported goods become relatively cheaper  inducing current account deficit

Low interest rate will make it less attractive to save in the country, contributing to outflow of fund and reduction in the inflow of fund. Interest rate reduction by the Bank of England was the main cause of the balance of payment deficit since 2008 as the need to induce local economy contributes to the exodus of fund from England, resulting in the persistent balance of payment deficit.

Political instability will also lead to extensive redistribution in local economic activities, prompting the local economy to rely more on the import of goods and services. At the same time, there is a reduction in the flow of FDI due to the lack of confidence in the economy. Consequently, balance of payment deficit occurs persistently as political instability is difficult to resolve

Given the extensive influence of the local economy, it is quite logical to attribute the local economy for the cause of the persistent balance of payment deficit. However, with the threat of globalization, balance of payment deficit may not be that persistent and difficult to eradicate.

Mobility of fund made possible for speculators to move fund out of the country to reap higher returns on fund due to interest rate and exchange rate differences. The extent of ease in transferring fund and lack of restriction encourages the mobility of fund as globalization seals the integration of the banking system among countries. Such countries may face extensive exodus of fund which will lead to balance of payment deficit when the local economy becomes less attractive for keeping funds.

Trade encouraged by the formation of FTA and trade network systems brought about by globalization will encourage countries like US to shift their production overseas to foreign countries like China with cheaper resources and labour to produce and then export back to US, which means that there will be higher degree of imports and outflow of investment, contributing to greater outflow that will lead to persistent balance of payment deficit as such impact of globalization is prolonged and impactful

Flow of investment made possible by the integration of economies through globalization will mean that some countries’ production bases would be influenced to move out of the country; cutting down the export of the countries as the local MNCs choose to produce their goods in foreign markets and sell directly in these markets. This will reduce the export revenue of the local economy and encourage the outflow of investment, which will worsen the balance of payment. Furthermore, as flow of investment is feasible, production may also be outsourced or relocated to other countries and re-import for fund accessibility for export again. This will bring down the value-added of the local economy’s production with the facilitation by globalization. This development can be absurd in US with firms like Nike, Apple and GM which are now relocating their production bases to different parts of the world.

Free mobility of resources would contribute to the growth of certain economies to gain more from trade and investment which will undermine the balance of payment deficit with these countries. Singapore’s efficiency of production will enable it to tap resources form countries like New Zealand to add value to her production while New Zealand will experience balance of trade and balance of payment deficit as she needs to import more high-valued manufactured goods

Conclusion
In conclusion, the internal factors of the economy will cause balance of payment deficit but the trade of globalization will exacerbate the effect of the balance of payment deficit, making it more persistent and difficult to curb.

Essay Question 6
“Since its accession to the World Trade Organization in 2001, China has carried out major trade and trade-related reforms. More than half of China’s exports are produced by foreign invested enterprises. (FIEs) who account for a particularly large share of exports of high technology products. FIEs enjoy various tax advantages over domestic enterprise.” Explain if the pattern of China’s exports is consistent with the theory of comparative advantage. [10]

Introduction
– Definition of Comparative Advantage (CA)
– State that the concept of CA is able to explain how consumers will trade as it determines the area of specialisation among countries for different production and set the trading prices to facilitate transactions

Main Body
1. Explain how the theory of CA is used to explain how countries would specialize based on the concept of opportunity cost
Countries will specialize in production with lower opportunity cost
– Low opportunity cost determined by natural factor endowment, skill and cost of labor, technological level
– China – large cheap labour, vast land space, availability of key resources (e.g. rare earth); Area of specialization – manufacturing product

2. Explain how the theory of CA is used to explain how the trading price would be determined based on the concept of opportunity cost
Pattern of trade – depends on trading price – term of trade – opportunity cost – set the amount of trade  trading price must be lower than the price of goods China can buy in order for it to import and higher than the price of goods China can sell domestically in order that she will export

10W<1C<15W
China: 1C=10W
US: 1C=15W
1C=12W

3. Identify and explain how other factors affecting the demand and supply of goods and servicesWhy theory of CA cannot explain the pattern of trade
a) Theory of CA is a supply-side based theory that explains how trade pattern is influenced by efficiency of production – cannot explain change in pattern of trade in China due to change in taste and preferences – preference for branded goods
b) Exchange Rate – affects opportunity cost – change in term of trade and efficiency of trade and production
c) Tax advantage – direct the flow of FDI – will direct flow of export demand as MNCs’ market demand is on an international basis

4. Explain and evaluate how other factors affecting the demand and supply of trade of goods between china and its trading partners.
(a) Exchange rate
(b) Cost of transport
(c) Taste and preference
(d) Free Trade Agreement
(e) Barriers to entry
(f) Social and political links
(g) Imperfect market condition

Conclusion
In conclusion, the concept of CA is useful in explaining how China will trade with other countries. However, in the real world, the imperfect market condition and other factors affecting the demand and supply of the trading activities between China and trading partners.

Essay Question 7
“Singapore’s unemployment rates have been ranging from 3.4% to 2.1% while inflation rate was around 2.1% to 0.5% from 2004 to 2007. However, inflation rate shot up 7.5% while unemployment rate hovered at 2.3% for the first half of 2008.” Explain why low unemployment and inflation rates are aims of any government and discuss whether the Singapore government should be concerned over the above mentioned scenarios. [25]

Introduction
Inflation is defined as the inordinate and sustained rise in price level while unemployment refers to the extent of utilization of labour resources in an economy. Any government would seek to maintain low inflation and unemployment as these aims promotes price stability and efficient utilization of labour resources which will create extensive beneficial impact for the economy. Thus, it is a concern for Singapore with regards the above condition, when they expect inflation and unemployment to rise in the first half of 2008.

Main Body
Inflation reflects the extent of price stability in an economy which is measured by the consumer price index on a year-on-year basis or base year comparison approach. It is important for the government to set it as the main aim as it will affect the internal and external aspects of the economy if price stability is not achieved where there will be low inflation or deflation.

Low inflation will ensure that the cost of living and cost of production is kept low. Internally, low inflation ensures cost of living is low to prevent unequal distribution of income as price increases for basic necessities will undermine the purchasing power of the lower income group while it raises the wealth of the rich when the price of assets appreciates. Low inflation can also help to maintain level of savings which is a critical source of funding for investment when the purchasing power and future value of money is maintained and thus, encourages the ability and willingness to save. Most importantly, low inflation will ensure that there will be improvement in standard of living, given that any percentage in GDP will be greater than percentage increase in price level, holding population growth constant, to induce a rise in Real GDP per capita.

Externally, low inflation is an important aim of the government as it maintains cost of production to ensure the country is able to develop competitiveness in the export market and in attracting Foreign Direct Investment (FDI). By keeping the cost of production low, the price of export in foreign value and the cost of FDI will be low to induce rise in export demand and FDI, critical to any economy that is export dependent. If the export demand and FDI have not been reduced, there will be no depreciation of the local currency which will affect the flow of fund into an economy that will affect the economy which has a financial centre for economic development.

As for low unemployment, this is measured by the unemployment rate which is the ratio of the number of unemployed to the total labour force which will determine the rate of utilization of labour resources in an economy. It is rational for government to set low unemployment as the main aims of the government since employment determines actual production capacity and low unemployment rate will mean high rate of production capacity that will raise the level of real output or national income. This will provide more tax revenue for the government to expand its expenditure to enhance economic development and improvement in well-being of the population. Furthermore, it will reduce the need of more government spending since there will be lesser unemployment benefits to be allocated if unemployment rate is low and such saving will reduce the opportunity cost of resources used to solve the adverse effects of unemployment which can be used for other aspects of a country’s development.

More direct implication of the need to see low unemployment rate as the main aim of the government since it has strong impact on the extent of unequal distribution of income and standard of living as those who are unemployed will have no income and will be undermined by a low purchasing power which will indicate a lower standard of living.

Thus, it can be noted why low inflation and unemployment are aims of the government and it is natural for the government of Singapore to place great concern over the above inflationary and unemployment condition.

Mathematically, the slight rise in unemployment rate is still considered low as it is slightly above the natural rate of unemployment of 2% for a small economy like Singapore and therefore, this is not a panic condition to worry. But if we examine closer, it can be noted that the unemployment condition is mainly in the form of structural unemployment and this form of unemployment is detrimental for Singapore since its effect is entrenched and prolonged. Workers who are unemployed due to skills incompatibility and displacement of workers due to use of machinery will take a long time period to retrain and adapt to the new industries. Very often, these workers may not be suitable for the new service-based industries if the workers have set skills for manufacturing-based type of industries. Thus, it may take a longer time and incur higher training cost for Singapore to eradicate the lack of skills for these workers to improve their employability.

In Singapore, the number of workers whose educational level is below ‘O’ level still occupies a high percentage of the working population and this may create a problem for the government in converting sufficient workers for high-valued industries and thus, the issue of structural unemployment is entrenched for some of the workers. In recent years, the government has seen a rise in the employment level of PMETs (Professionals, Managers, Engineers and Technicians) and the group of older PMETs is taking longer time period to find employment due to technological advancement that undermines the skill level of PMETs.

Furthermore, structural unemployment will aggravate the social life of the people, especially the lower income group. It will also mean that the government may need to spend more government subsidy in helping those who are unemployed and this may be difficult for the workers in Singapore as we do not have unemployment benefits for these unemployed workers. Consequently, the country will have a higher degree of unequal distribution of income and lower standard of living as a significant group of population is unemployed, thus, this will be a serious problem for Singapore, which has a high Gini-coefficient ratio. Also, the existing level of unequal distribution of income is quite high and may create social dissatisfaction, which explains why the government needs to ensure this form of structural unemployment will not prevail as it is a serious concern Singapore needs to pay attention to.

As for inflation, the sharp rise in inflation rate from a mild rate around 2% to 7.5% in the first half of 2008 is of great concern due to its magnitude of increase and the nature of inflation and its impact on Singapore’s economy. Inflation will be a serious concern as it affects the price and cost competitiveness in the export and our capacity to attract FDI. As our cost of production rises as the cost of import rises due to rise in global price of resources like oil and steel, we have to raise our price of export in foreign value which will lead to a fall in export demand. As export demand to GDP ratio is around 2.5 times of our GDP, Singapore’s reduction in export demand will contribute to a large fall in the GDP which subsequently leads to a reduction in production and employment.

As our economy is a price-taker in the global resource market, the rise in global prices of resource will definitely raise our cost of import, implying that such imported inflation is inevitable. Although some may argue that our exchange rate management policy is a gradual and modest appreciation strategy which can help to dampen the cost of imports, it is not a feasible measure in the long run when the owner of resources in the global market persists to raise price of their resources. Furthermore, the impact of rising inflation will affect the cost of living, making it difficult for industries to lessen excessive wage increment as real wage of local or foreign workers in Singapore will be lowered. This demand for wage increment will bring about a wage-price spiral which can be quite detrimental even for Singapore which is known for her capacity to control wage increment within the level of productivity.

Although the cost of managing inflationary impact is less than the cost of managing unemployment, the adverse impact it has on unequal distribution of income will still be a problem for Singapore as inflationary condition will seriously aggravate this problem since the price of assets will rise excessively to raise the wealth of the rich while the purchasing power of the low income group will be lowered. This high degree of income disparity will counter the aim of the government to set up an inclusive growth which will spread the benefit of economic growth to all spectrum of the people.

Conclusion
In view of all these development of higher unemployment and inflation rate, it can be understood that it is understandable and rational for governments like Singapore to place concern on these aims to prevent the detrimental effects.

Essay Question 8
“The unemployment rate in Singapore increased from 2.7 per cent in 2001 to 4.2 per cent in 2005.” To what extent could a shift from direct tax to indirect tax reduce unemployment in Singapore? [15]

Question Analysis
– Assess whether a shift from direct tax to indirect tax (supply side policy) could reduce the main types of unemployment.
– Illustrate the recent increase in G.S.T from 5 % to 7% as an increase in indirect tax rate and how rates of personal income tax and corporate tax have declined in the recent years.

Introduction
Distinguish direct taxes from indirect taxes and illustrate with examples. The key area they need to emphasise is that the change in tax structure is a reflection of change in a supply side policy with broader aims and may not address all types of unemployment, especially fiscal policy.

Main Body
1) Cyclical unemployment
A change in tax structure will be least likely to have an impact on, cyclical unemployment, unless there is a corresponding change in government expenditure (G) and consumption (C) and a lowering of taxes (T). Even with such changes in G and C and T, the multiplier effect on national income and employment will be minimal as the multiplier (k) is less than one In Singapore.

2) Structural unemployment
The level of structural unemployment could be overcome if foreign firms respond to tower corporate taxes by setting up firms and generate jobs in Singapore. The change in corporate taxes could encourage foreign firms to retrain structurally unemployed workers by conducting retraining programmes to meet their new job requirements or employ retrained workers trained by the state. Argue whether it is feasible using government subsidies to retrain the workers in the private sector. They may evaluate the economic cost and benefit of training workers. Refer to Singapore government schemes, like SDF grants for retraining workers or government subsidized training of workers.

3) Frictional unemployment
The fall in personal income tax could motivate workers, who had to bear heavy burden of taxes in the past, to look for jobs. But fall in direct taxes may not solve all types of frictional unemployment as it may not have a major impact on new entrants into the labour force.

The fall in corporate taxes may lead to a burgeoning of new firms or expansion of existing firms. The increase in jobs arising from the change in the number of new firms and expansion of existing firms might reduce the search time to look for jobs for those joining the labour force or those changing jobs from other sectors.

Conclusion
– The shift from direct taxes to indirect taxes may likely lead to a greater reduction in structurally and frictionally unemployed workers than cyclically unemployed workers.
– This is more likely to occur as reduction in corporate taxes is one of the primary concerns of foreign firms to establish in Singapore to produce goods and create jobs.
– However, there are far more effective supply side policies like retraining workers for new industries and deregulation of the markets than tax reduction of corporate taxes, in addition, reduction in personal income taxes may not reduce frictionally unemployed workers substantially as workers do not have to weigh unemployment benefits with income tax rates in Singapore.
– Job fairs and better dissemination of availability of jobs through the media could reduce job search time for frictionally unemployed workers.

Economics Tuition Classes

Who should join our tuition programme?


Economics Focus features different tuition programmes to match the needs of secondary and JC students. For JC students, we offer H2 and H1 Economics tuition classes that are focused on conceptual reinforcement and skills-based application to excel at the essay writing and CSQ components. For secondary students, we conduct O Level Economics tuition that support the content enrichment of topics and development of answering techniques to answer MCQs, DRQs (Data Response Questions) and structured questions.

Economics Focus Singapore - SGEducators Tuition Hub - H2 Economics Tuition

H2 Economics Tuition

Students taking H2 Economics tuition will develop an in-depth and broad understanding of economics issues and concepts in exam-oriented ways. This implies that students are trained to observe and analyse economic issues from given extracts and derive arguments in organized ways. Also, knowledge consolidation is achieved through integration of chapters to poise students for the examination questions.

Economics Focus Singapore - SGEducators Tuition Hub - H1 Economics Tuition

H1 Economics Tuition

In contrast to the H2 Economics subject, students taking H1 Economics tuition will build up their data analysis and interpretation skills to excel in Case Study Questions (CSQs), which the sole question type for the new A Level Economics syllabus (8823). During the tuition programme, students will learn to extract out important information from the given economic data and derive the underlying implications to tackle the short answer questions effectively.

Economics Focus Singapore - SGEducators Tuition Hub - O Level Economics Tuition

O Level Economics Tuition

For students taking Economics for O Level, our tuition will guide them in the complex field of Economics and develop strong  Economics fundamentals in them. Students will be taught to interpret different question types such as MCQs, DRQs and structured questions and develop content to comprehend basic economic concepts, like Inflation. Students will synergise their knowledge through regular class practices as questions will require knowledge integration from multiple chapters.

Distinctive Features of the Economics Tuition

What will you learn in our programmes?


Our Economics Tuition is very effective in preparing JC students for their examinations as we know what the areas of teaching we need to teach and nurture and understand the kind of errors that students will make in their learning and studying process. We take pride in integrating online and offline learning to immerse JC students in this FLIP education strategy that modern educators are promoting in many pre-tertiary and tertiary education institutions. You can understand how we help our students to be better from skills development programme and the materials that we have prepared to help JC students as seen from our JC Economics Essays, JC Economics Notes, E-learning videos, articles and publications in this subject of JC Economics.

In our skills development programme, we aims to nurture students’ case study techniques, essay writing skills and capacity to illustrate graphical demonstration to prepare for our students to handle the complexity and variants of the examination.

We also develop the efficient learning frame work that will encompass the extensive class practices with reviews and correction of errors for improvement. We strive to cultivate students’ interests in this subject with a series monthly discussion on economic issues that make learning more empirical and interesting.

Lastly, our materials that we have prepared in areas of JC Economics Essays and JC Economics Notes at our website will be great help and this is also fostered with E-learning videos that will make studying and preparation easier and effective.

Most of all, our class teaching will integrate all these learning tools and experiences to ensure that JC students are interested, motivated, trained, nurtured and built to ace for GCE O and A level examination.

Understanding and application of Economics knowledge
Economics Focus Singapore - SGEducators Tuition Hub - Application of Economics Concepts
Many students face much difficulties understanding Economics due to the subject being relatively new to them. Over here at Economics Focus, we simplify the knowledge of Economics and help students understand the subject efficiently.
Case Study Answering Techniques
Economics Focus Singapore - SGEducators Tuition Hub - Economics Case Study
Case Studies may appear to be easy to many because of the range of sources and contexts provided that help support a student’s writing. However, such thinking is greatly discouraged due to the evolution of case studies. Case studies, now, requires in-depth analysis and evaluation which can be challenging to grasp. Students in Economics Focus will learn to hone their analysis and evaluation skills with our specialised tutors who will guide the students throughout.
Spontaneous and Reflective Thinking and Writing Skills
Economics Focus Singapore - SGEducators Tuition Hub - Reflective Thinking and Writing Skills
Reflective thinking and writing skills are imperative because it is still a required skill in the thinking questions (usually last few) of case studies. Our students will learn to think beyond the boundaries of questions and seek to support their answers with insightful ideas and solutions. Moreover, they will also learn to write in an efficient and concise manner that is easy to digest for readers. This is to ensure that our students can pen down their ideas fast and well under examination conditions.

What are the challenges in Economics?

Be prepared for your study of A Level Economics


Given the understanding of the H2 and H1 Economics examination format and areas of learning, it is evident that students will encounter obstacles during the study of the Economics subject, like time management and data interpretation. Therefore, you should consider the following questions to determine whether you are ready to tackle the examinations.

Do you have the economics acumen?
In order to answer economics case study questions, students are expected to understand the context of discussion in the given extracts and form logical judgments within the short timeframe at the examinations. Students can assess their competency level by reading economics-related news and attempt to derive the underlying implications.
Can you relate economics knowledge to the question?
Another potential learning setback is about the ability of students to apply their knowledge of Economics to the stated case study questions. While students can simply undergo rote learning and memorisation, it is inadequate to regurgitate the content without paying heed to the specific question requirements. Therefore, it is imperative for students to hone their thinking and writing skills to exhibit their proficiency in analysing economics issues.
Can you develop the economics explanation and evaluation?
Students who aspire to ace the A Level Economics examinations must possess the capability of forming clear and coherent economics explanation to answer the case study questions. During the answering process, students must may encounter the problem of having idea fragmentation, which leads to a disorganized answer structure. Furthermore, students may have the tendency to miss out on the evaluation part due to inadequate practice.

Class Schedule

Get started in your revision


Embark in this experiential journey with Economics Focus. We offer Economics tuition classes for both JC1 and JC2 students. View our latest class schedule and contact JC Economics Tutor Simon Ng at 9689 0510 to find out more about the class activities and clear your doubts on the study.

JC1 Economics Tuition

The JC1 Economics tuition schedule will feature different time-slots to facilitate the ease of planning for students. Also, there are many class activities that will promote active thinking and reflection towards economics issues.

Type AType BType C
For Students from: AJC, IJC, JJC, NJC, RJC, SAJC, TJC, TPJC For Students from: ACJC, CJC, MJC, PJC, SRJC, YJC For Students from: DHS, HCI, VJC, NYJC
Term 1
  • Introduction to Economics,
  • Decision-making by economic agents,
  • Markets and their application
  • Introduction to Economics,
  • Decision-making by economic agents,
  • Markets and their application
  • Introduction to Economics,
  • Decision-making by economic agents,
  • Markets and their application
Term 2
  • Theory of Firm,
  • Cost of Production,
  • Market Structure
  • Price Mechanism,
  • Market Failure
  • Price Mechanism,
  • Market Failure
June Holidays
  • Revision of Term 1 and 2 topics,
  • Intensive Revision for Mid-Terms
  • Revision of Term 1 and 2 topics,
  • Intensive Revision for Mid-Terms
  • Revision of Term 1 and 2 topics,
  • Intensive Revision for Mid-Terms
Term 3
  • Price Mechanism,
  • Market Failure
  • Theory of Firm,
  • Cost of Production,
  • Market Structure
  • National Income Accounting and Economic Indicators,
  • Aims of Government and Policies,
  • Macroeconomic models and their applications
Term 4
  • Preparation for Promotional Examinations,
  • Headstart Program for JC2
  • Preparation for Promotional Examinations,
  • Headstart Program for JC2
  • Preparation for Promotional Examinations,
  • Headstart Program for JC2

JC2 Economics Tuition

For JC2 students, the Economics tuition schedule will include A Level examination preparation that is the main goal at the end of the journey. Be prepared for the challenges that lie ahead by signing up for our tuition programmes now.

Type AType B
For Students from: ACJC, AJC, CJC, IJC, JJC, MJC, NJC, PJC, RI, SAJC, SRJC, TJC, TPJC, YJC For Students from: DHS, HCI, NYJC, VJC
Term 1
  • Macroeconomic Models
  • Applications to Macroeconomic Models
  • Unemployment
  • Revision: Inflation and Unemployment
  • Economic Growth
  • Macroeconomic Policies I
Term 2
  • Inflation
  • Economic Growth
  • International Trade and Protectionism
  • Foreign Exchange and Balance of Payment
  • Macroeconomic Policies II
June Holidays
  • Revision: Term 1 and 2 topics
  • Intensive revision for mid-terms
  • Revision of Term 1 and 2 topics
  • Intensive revision for mid-terms
Term 3
  • Globalization
  • Revision: Demand and Supply, Elasticity of Demand and Supply
  • Globalization
  • Revision: Demand and Supply, Elasticity of Demand and Supply
  • Revision: Market Failure
Term 4
Intensive Revision for A Level Economics examination Intensive Revision for A Level Economics examination

Hear from our Students

See from the viewpoints of former students who have realised their aspirations


We would like to express our appreciation towards students who have improved their abilities to think and write well at our Economics Tuition. Throughout the journey, these students have demonstrated their determination and will to learn and improve their conceptual understanding and writing techniques. As such, the students’ efforts have paid off, seen in terms of the significant improvements in their exam results. Likewise, we hope that you will be inspired by their individual stories and seek to achieve greatness in your studies.