A Compilation of Economics Examples

Scope
Microeconomics
1. Demand and Supply/Elasticity
2. Government Intervention 1
3. Firms and How They Operate: Cost of Production, Market Structure
4. Government Intervention 2
5. Market Failure
6. Government Intervention 3
Market System
1. Scarcity, Choice and Opportunity Cost
Concept of Scarcity
(none)
2. Resource Allocation in Competitive Markets
Determinants of Demand (EGYPTO: Expectationgs of Future Px, Gov Policy, Income,
Price of Related Goods, Taste and Preference, Others) and Supply (TEPIGSO: Technology,
Expectations of Future, Price of Related Goods, Input Prices, Gov Policies, No. of Sellers,
Others)
Rising demand from emerging markets such as India, China and Brazil due to rising income
has resulted in airfares, hotel room rates and rental car rates increasing steadily around the
world.
Elasticity Concepts: Goods that are price (in)elastic, income (in)elastic, cross-price
(in)elastic
Saudi Arabia is the only producer with significant spare capacity that could quickly be
released if the oil price rose too high. The other oil producers have a more price inelastic
supply curve due to lack of spare capacity.
Extent of increase / decrease in supply due to changing FOP is determined by the intensity
of the FOP: manufacturing has become more efficient and less energy-intensive service
industries have increased their share of the economy. Hence, less vulnerable to oil supply
shock.
Coffee( as well as cigarettes, food, medication and drugs) has a price inelastic demand as
many people are heavily reliant on it to stay awake and there is little substitutes to coffee: In
USA, when coffee bean prices rose by 86%, overall consumption still rose by 1.2%.
Luxury goods like computers and jewellery has many substitutes that allow consumer to
derive similar level of utility from, so an increase in price will result in a more than
proportionate increase in quantity demanded.
3. Firms and How They Operate (Including COP)
-Examples of Oligopolies

IN US,
-Four music companies control 80% of the market - Universal Music Group, Sony Music
Entertainment, Warner Music Group and EMI Group
-Four breakfast cereal manufacturers - Kellogg, General Mills, Post and Quaker
-Duapoly: Coca Cola and Pepsi Cola
Closest example to PC market: Apples, Cabbages (fruits and vegetables), Horse betting
(consumers can just look down the line to see who is offering the best odds, and so no one
bookie can offer worse odds than those being offered by the market as a whole, since
consumers will just go to another bookie. This makes the bookies price-takers. Furthermore,
the product on offer is very homogeneous, with the only differences between individual bets
being the pay-off and the horse. )
IN Singapore, oligopolistic firms are largely in service industries
Cinema chains: Main players are Cathay, Golden Village and Filmgarde
Telecommunications: Singtel, M1, Starhub (Used to be monopoly: Singtel but evolved to
become oligopoly, more details in Market Failure)
Banking: OCBC, DBS, UOB
-Examples of various firm structures in Singapore
Oligopoly: As above
MPC: (Small degree of pricing power, slightly differentiated)
-Basic healthcare provided by General Practitioners
-Neighbourhood convenience stores
Monopoly:
Singapore Press Holdings (BUT in the face of competition from foreign publications SPH has
incentive to continually improve on content while charging the same price)
Examples of IEOS experienced by large firms
Spreading of costs of expensive machinery: Such as the hugely expensive and big printing
machines used in printing millions of newspapers and magazines every week in a
publications industry
Bargaining power: Electricity generators can negotiate lower prices when finalizing coal and
gas supply contracts; Roasters (middlemen who process the beans and value-add)
negotiating with coffee farmers to lower price of coffee beans
Six-tenth rule in chemical plants (popular example): increasing the quantity produced in a
chemical plant by a certain percentage will increase total cost by only six-tenths as much,
due to various dimensions
Technical economies of scale: Comfort Taxi and CityCab are the largest players in
Singapores taxi industry. They have a state-of-the-art taxi booking system which wirelessly

connects taxis using GPRS technology. High cost of installation is spread across a large
level of output.
Diseconomies of Scale (Managerial): SMRT, major train breakdown incidents due to
insufficient communication between the various stakeholders, weak command structure,
coordination problems as firm gets larger due to many levels and departments the firm has.
Examples of markets with high and low IEOS:
Tapwater: To supply tapwater, high fixed cost due to installing of an extensive network of
water pipes. Spreading of such high fixed cost over large output: MES at large outputs
Cars: Involve many different complex stages. Hence, by increasing output and splitting up
the process (specialisation), less training of workers+ more efficient process.
But examples of markets with little economies of scale?: 3D printing . Its software can be
endlessly tweaked and it can make just about anything. The cost of setting up the machine
itself is low. Easy to make, no need for specialisation.
-Examples of BTE in real world (Natural and Artificial)
Product Loyalty: Schemes such as Tescos Club Card, help oligopolists retain customer
loyalty and deter entrants who need to gain market share.
Vertical Integration: Heineken owns several UK pubs hence securing greater market share
making life tough for potential entrants
Product proliferation: Crest, a toothpaste brand, offers 40 types of toothpaste with little
variation.
Product proliferation (Reduce post-entry profits): Shell offers 3 superior grades of petrol as
well as diesel (Shell Formula 98, Shell Formula 95, Shell V-Power, Shell Diesel)
Control of essential FOP: Shell and Esso are not just retailers of petrol. They are involved in
locating, exploring, extracting and refining oil and gas for use in homes and business. They
are in control of the oil resources. New firms are unable to enter without access to these oil
resources.
-Examples of price discrimination in real world
Examples of forms of price discrimination include coupons, age discounts, occupational
discounts, retail incentives, gender based pricing (e.g. Ladies Night at a wine bar) and
financial aid.
Pharmaceutical industry: Drug-makers charge more for drugs in wealthier countries (greater
ability to pay, more price inelastic demand, increase in price smaller decrease in qty dded).
For example, drug prices in the United States are some of the highest in the world.
Europeans, on average, pay only 56% of what Americans pay for the same prescription
drugs.

-Examples of collusion in real world

<Formal Collusion: Cartel>

In 2002, Sotheby's has been fined 12 million by the European Commission for rigging the
art market in collusion with rival Christie's.The auction houses broke EU law by agreeing in
1993 to raise their charges to customers instead of competing with each other.
-Examples of mutual dependence in oligopolies (e.g. price stability)
In Singapores cinema industry, there is intense non-price differentiation such as the
sponsorship of free movie screenings, but the cinemas rarely compete by prices. Movie
ticket prices are relatively stable.
-Examples of non-price strategies:
*Note: Product differentiation is both BTE (increase cost of entry) and non-price
strategy!
MPC: Small scale product differentiation to reduce PED of DD curve to have greater price
setting ability:
-Ai-Yu Tea in KOI, Earl Grey 3 Brothers Bubble tea in Gong Cha (signature items in menus
of bubble tea shops)
Oligopoly: More large scale product differentiation to increase DD in 3 ways
Product Differentiation (Increase cost of entering) : Sponsorship of UK Football Premiership
by Barclays Bank to increase popularity and brand recognition amongst customers
-Examples of Price wars
- In 2011, Tesco and Asda have started a price war, promising price cuts worth hundreds of
millions of pounds, due to Tescos attempt to gain back consumers to come back, as Tesco
experienced falling demand for the past few years.
-Examples of X-inefficiency
Indian Railways has 1.36 million strong staff (overstaffed) with low productivity, excessive
operating costs and large subsidies. Reason is because Indian Railways is a monopolist,
sheltered by BTE, still can make supernormal profits. (Complacent)
-Examples of dynamic efficiency in real world resulting in innovation and choice
OSIMs focus is on healthy living and overall wellbeing, constantly innovates to come up with
series of products such as the uZap, iGallop and uPapa. It is competing against other
dominant firms such as Omron and National.
In 2010, Samsung introduced the Galaxy S-Line, a series of smartphones with bigger
screens. The series was so as to cater to the preference for wider screens, and has proved
to be a hit for competitor Apple.
-Oligopolistic bus industry in SG offers better quality of bus services by including IRIS
(Intelligent Route Information System) to provide bus arrival time estimation, installing TV
Mobile on buses, offering new bus routes etc.

Market Failure and Government Intervention

4. Market Failure
Examples of goods with positive and negative externalities, and demerit and merit
goods
Positive externalities
1. R&D (Production externality)
R&D refers to activities undertaken by the firm to discover and create new knowledge which
enhances the firms products, services and even production processes. R&D benefits the
society through the creation or improvement of knowledge. Third parties benefit from firms
engaging in R&D through the enjoyment of better quality products and lower prices due to
discovery of more cost-efficient methods. Left to the free market, the external benefits will be
disregarded by firms acting in pursuit of their self-interest, leading to underproduction.
Case for government intervention: Achieve both micro and macroeconomic goals
Efficiency: Achieve allocative efficiency by resolving the market failure
Sustained economic growth and low inflation: R&D raises productivity and leads to
the expansion of productive capacity, leading to non inflationary growth
2. Healthcare (Merit good)
Sources of market failure:
Positive externalities: External benefits in terms of lowering the risk of contracting the
disease by third parties, lower income spent on healthcare expenditure by third
parties
Imperfect information: Do not have sufficient information to recognise the future

benefits of healthcare since these benefits are often remote and will only surface in
the long run (Complex information + Hard to find+ Rarely need it, dont find)
Market dominance: Industry dominated by one or two major healthcare groups
Start up cost for the use of technology, equipment, employment of trained

Negative externalities
1. Motor vehicles
Usage of motor vehicles results in external costs on third parties such as release of
greenhouse gases, pollution, as well as congestion for members of society who are not
involved in the consumption of driving/car usage. Pollution leads to harmful health effects
which generates additional healthcare expenditure.
5. Government Intervention in the Market
Real world example of government policies (subsidy, quota, compulsory consumption
etc.)
SG:
Tackling inequity
Workfare Income Supplement encourages older low wage workers to work by
supplementing their income and retirement savings; Workfare Training Scheme encourages
them to upgrade their skills through training so that they can improve their employability,
upgrade to better jobs and earn more. Together, they make up Workfare, a key pillar of

Singapore's social security landscape to provide support for low-wage workers so they have
the best chance to progress.
Example of government failure
The Common Agricultural Policy in EU has been widely criticised as a classic example of
government failure. In an attempt to support European farmers that are making losses, the
government imposed import tariffs and export subsidies, resulting in overproduction (which
involved toxic fertilisers to increase yield), hurting the environment, developing countries that
are unfairly treated due to tariffs, and consumers.
National and International Economy
6 .Key Economic Indicators
Unemployment rate, Inflation Rate and Economic Growth rates of key countries in the
recent years (Good for evaluation as well)

Data specific to Singapore (such as export as % of GDP)

7. How the Macroeconomy Works (Including Policies)
Examples of type of goods (small and open economies such as Sg) exports
Singapore data as of 2013, from MTI Website
Top 10 Exports

% Share

% Growth

Petroleum Products Refined

23.8

-4.4

Electronic Valves

21.9

10.5

Telecommunications Equipment

2.9

0.4

Parts & Accessories

2.4

-16.4

Data Processing Machines

2.4

3.5

Measuring Equipment

1.8

5.2

Specialised Machinery

1.7

-11.0

Aircraft & Associated Equipment

1.6

10.7

Electrical Circuit Apparatus

1.6

-5.3

Electrical Machinery

1.5

0.6

TOTAL

100

0.6

Top 10 Imports

% Share

% Growth

Petroleum Products Refined

20.0

-3.4

Electronic Valves

17.2

9.7

Petroleum Crude

9.5

-10.8

Telecommunications Equipment

3.3

-5.9

Non-Electric Engines & Motors

2.1

22.7

Aircraft & Associated Equipment

1.9

-11.1

Data Processing Machines

1.8

-5.9

Parts & Accessories

1.7

-18.1

Natural Gas

1.6

-4.1

Measuring Equipment

1.5

4.0

TOTAL

100

-1.6

Top 10 Destinations for Exports

% Share

% Growth

Malaysia

12.2

-0.6

China

11.8

10.3

Hong Kong

11.2

2.6

Indonesia

9.9

-6.3

EU

7.6

-15.0

United States

5.7

7.3

Japan

4.3

-2.5

South Korea

4.1

0.4

Australia

3.8

-7.6

Taiwan

3.7

6.0

TOTAL

100

0.6

Top 10 Origins for Imports

% Share

% Growth

EU

12.4

-3.3

China

11.7

11.7

Malaysia

10.9

1.2

United States

10.3

0.2

Taiwan

7.8

14.8

South Korea

6.4

-6.1

Japan

5.5

-13.6

Indonesia

5.2

-4.7

United Arab Emirates

4.4

5.5

Saudi Arabia

3.4

-25.2

TOTAL

100.0

-1.6

Examples of goods with PED(M and X) more or less than 1

Examples of speculation leading to devaluation (self-fulfilling prophecy)- 1 e.g. will do
Examples of conflict in economic goals (IMPT)
Problems of increasing debt:
In Spain, the government implemented fiscal austerity measures in 2011 to reduce Spains
public debt which was estimated to be 63.4% of GDP in 2010. As a result, the increase in tax
rates has seen widespread protests by youth who anticipate jobless future and lower SOL.

Examples of prominent expansionary and

contractionary FP/MP/unconventional MP
Example of overcrowding effect
Example of competitive devaluation/ retaliation
Examples of supply side policies both in
Singapore and overseas
8. International Economics

Data about Singapores trade pattern (Who she

trades with, What, Quantity)
Examples of benefits of trade in real world
Examples of factor endowments (source of CA)
in countries
Examples of IEOS reaped due to trade in real world
Companies like Mitsubishi Heavy Industries make fighter jets, warships and missiles in
Japan. Previously due to self-imposed ban on arms exports, the defense equipment was
only sold to Japan Domestic force and was expensive to make. With lifting of ban, now
exports to AUstralia, Turkey and India, and extensive IEOS is reaped.
Examples of detriments of protectionism in real world
Note: Singapore does not impose any import/quotas on exports. Only kind of
protectionist measure we impose would be on demerit goods such as cigarettes,
fireworks etc. Remember free trade policy.
Example: US Buy American Policy in the aftermath of the Global Financial Crisis (2009)
Buy American clause in the $787 billion stimulus package required that all public
works projects funded by the stimulus plan must use only iron and steel produced in
the US
Create only 1000 new steel industry jobs, but cost as many as 65000 across a
number of associated sectors
Gain in steel industry employment (1000 people) is small because steel is very
capital intensive, vis a vis US being a giant economy with labor force of roughly 140
million people
Violate US trade obligations and damage US reputation
Contradicts the G20 commitment not to implement new protectionist measures - a
commitment that was designed to forestall a rush of beggar-thy-neighbour policy
Example: US Tariffs on Chinese Tyres meet retaliation
Chinas retaliatory measure: tariffs on the import of US chicken parts
Impose anti-dumping tariffs ranging from 50.3% 50 105.4%
Countervailing duties of between 4.0% to 30.3% on US
Reduced imports by $1 billion as US poultry firms experienced a 90% collapse in
their exports of chicken parts to China
Example: US Tariffs on Chinese Tyres
Obama: tariffs had saved more than 1000 jobs
BUT, on balance, had probably destroyed more than 2500 jobs in other sectors
(because when consumers spend more money on tyres, they have less money to
spend on other retail goods) (excluding the casualties from the retaliatory actions
China took against US exporters)

Big winners were the alternative foreign exporters, primarily located in Asia and
Mexico, who sold low-end tyres to the US. Domestic tyre producers in US were
secondary beneficiaries.

Productivity in Singapore
2011 --> +2.2%
2012 --> -1.4%
2013 --> -0.2%
In 2013, figures of Singapores non-oil domestic exports
- South Korea: -25.3%
- EU: -25.5%
- Malaysia: -9.8%
- Japan: -9.7%
- Indonesia: -7.6%
- Thailand: - 6.7%
- US: -6.6%
- HK: -5.3%

Possible Ways of Evaluation

USA
1. -Still the worlds premiere reserve currency held by central banks around the world
-USA can borrow in its own currency and can pay off debt just by printing more USD
(which the rest of the world are willing to accept)
Uses:
-USA is not at risk of debt crisis, does not need austerity measures to cut spending and
pay debt.
Singapore
1. -Singapore has FTAs with Asia, Middle East, South America etc. FTAs in Singapore
are easy to sign as she does not export politically sensitive goods such as agriculture
Uses:
-FTAs will be feasible and beneficial to Singapore.
2.Singapore is one of the most open, and thus competitive, markets in the world. The
2011 World Bank Ease of Doing Business Index ranks Singapore as the best country in
the world to do business ahead of Hong Kong and New Zealand.
+
Singapore is also the only Asian country to have AAA credit ratings from all three major
credit rating agencies Standard & Poors, Moodys and Fitch. According to the 2011
Index of Economic Freedom, Singapore is the 2 freest economy in the world.
nd

Uses:
-Despite any prevailing circumstances etc. that may dampen investment in SG,
investment in Sg still likely to be good (K and F surplus, LRAS)
China
1. (Very) Recently, the restrictions in China are becoming more onerous in terms of
government investigations on the wealthy Chinese who hold large sums of money. Thus,
there is an increasing trend of wealthy Chinese moving their money out to invest
Uses:
-Capital outflow likely to increase, increasing SS of Yuan in FOREX, downward pressure
on value of Yuan.