Category archives: Latest Articles

  • Introduction Investment expenditure is the expenditure made by firms on goods produced not for their present use but for their use in the future. In economics, investment is comprised of business fixed investment (i.e. new factories and machinery), residential investment (i.e. new houses, apartments and condominiums) and inventory investment (i.e. the change in the value of unsold goods). Many students think that weakening business sentiment will lead to interest inelastic investment. Mr. Edmund Quek willĀ discuss this economic misconception in economics tuitionĀ with the students. Exposition A fall in interest rates will lead to an increase in investment expenditure, and vice versa. In a large economy, interest rates generally fall due to central bank intervention in the money market. To increase economic growth or decrease unemployment, the central bank can increase the money supply by conducting an open market purchase. When the money supply increases, the amount of reserves in the banking system will rise. When this happens, interbank rates will fall which will lead to a fall in the level of interest rates in the economy. Lower interest rates will decrease the incentive to [...]
  • Oil prices are currently around US$35. It is virtually public knowledge that the slide in oil prices from US$115 in June 2014 to the current level is due to a combination of events, namely the increase in shale oil production in the United States and the increase in crude oil production in OPEC, particularly in Saudi Arabia. Accordingly, oil prices will rise when shale oil production in the United States or crude oil production in OPEC decrease. However, both scenarios are unlikely, at least in 2016. Some people have been wondering why OPEC, particularly Saudi Arabia, has persistently refused to reduce crude oil production to increase oil prices which will lead to an increase in government revenue and export revenue due to the price inelastic nature of the demand for oil. It is true that a cut in crude oil production in OPEC will reduce the world supply of oil, as OPEC accounts for about 40 percent of the world supply of oil, resulting in a rise in oil prices. However, doing so will increase the profitability of shale oil production in the United States which will induce the U.S shale oil producers to increase production. This will lead to an increase in the world supply of oil re[...]
  • Introduction A free trade agreement (FTA) is an agreement between two or more economies to remove or reduce barriers to trade with the objective of increasing the cross-border movement of goods and services between the economies. Exports are the expenditure made by foreigners on domestic goods and services. Imports are the expenditure made by domestic residents on foreign goods and services. Aggregate demand is the total demand for the goods and services produced in the economy over a period of time and is comprised of consumption expenditure, investment expenditure, government expenditure on goods and services and net exports. Many students think that signing more free trade agreements will not increase aggregate demand if it leads to a greater increase in imports than exports. ThisĀ economic misconception will be discussed in economics tuition. Exposition Take Singapore for example. When tariffs on Singaporeā€™s goods are removed or reduced in the FTA member countries, firms that import and sell Singaporeā€™s goods in the FTA member countries will decrease prices to maintain competitiveness. Therefore, signing FTAs in Singapore will make Singaporeā€™s goods cheaper in the FTA memb[...]
  • Introduction Interest rate is the cost of borrowing and the reward for lending. Aggregate supply is the total supply of goods and services in the economy over a period of time and is determined by the production capacity and the cost of production in the economy. Many students think that an increase in interest rates will lead to a rise in the cost of production in the economy which will result inĀ a decrease in aggregate supply. Mr. Edmund QuekĀ willĀ discuss this economic misconceptionĀ in greater detail with the students in economics tuition. Exposition Firms employ factor inputs to produce output. These factor inputs include plants and machinery which are often financed through loans. As an increase in interest rates will lead to an increase in interest payments on loans, the cost of production in the economy will rise. Many students think that this will lead to a fall in aggregate supply. This is erroneous. To understand this, we simply need to draw a distinction between fixed costs and variable costs. Fixed costs are costs that do not vary with the output level. In other words, an increase in the output level will not lead to an increase in fixed costs. Fixed costs will be [...]
  • Introduction Aggregate demand is the total demand for the goods and services produced in the economy over a period of time and is comprised of consumption expenditure, investment expenditure, government expenditure on goods and services and net exports. Imports are foreign goods and services which are produced in other economies. Many students think that aggregate demand includes imports. The Principal Economics Tutor willĀ discuss this economic misconceptionĀ in economics tuitionĀ with the students. Exposition As aggregate demand refers to the total demand for the goods and services produced in the economy, it does not include imports. However, the components of aggregate demand which are consumption expenditure, investment expenditure, government expenditure on goods and services and exports include imports. Therefore, to derive aggregate demand, imports are subtracted from consumption expenditure, investment expenditure, government expenditure on goods and services and exports. AD = C + I + G + (X ā€“ M) In the above function, aggregate demand (AD) is the sum of consumption expenditure (C), investment expenditure (I), government expenditure on goods and services (G) and expor[...]
  • Introduction Labour productivity refers to output per hour of labour. Many students think that an increase in labour productivity indicates an increase in the skills and knowledge of labour. This is an economic misconception which will be discussed in economics tuitionĀ at Economics Cafe Learning Centre. Exposition An increase in the skills and knowledge of labour will lead to an increase in labour productivity. When workers become more skillful and knowledgeable, the amount of output produced with one hour of labour will rise resulting in an increase in labour productivity. The skills and knowledge of labour may increase due to education and training which will lead to greater human capital. Many governments provide education and training directly, by setting up educational institutes, and indirectly, by giving subsidies or tax incentives to firms to induce them to send their workers for education and training. Although an increase in labour productivity may be due to an increase in the skills and knowledge of labour, this is not always the case. There are various factors which will lead to an increase in labour productivity. Apart from an increase in the skills and knowledge[...]
  • Introduction A budget deficit occurs when government expenditure exceeds government revenue. Public debt refers to the amount of money that the government owes. It is also known as national debt, sovereign debt and government debt. Many students think that a decrease in budget deficit will lead to a fall in public debt. There will be a discussion on thisĀ economic misconceptionĀ in economics tuitionĀ at Economics Cafe. Exposition When the government runs a budget deficit, it will borrow by issuing securities (i.e. bonds and bills) to finance the deficit, assuming it does not have sufficient reserves. When this happens, the public debt will rise. A decrease in budget deficit may occur due to a decrease in government expenditure, an increase in government revenue, or both. Many students think that a decrease in budget deficit will lead to a fall in public debt. This is erroneous. When the budget deficit falls, the public debt will not fall. Rather, a decrease in budget deficit will lead to a slower rise in the public debt. This is because when the government runs a smaller budget deficit, what it means basically is that it will borrow a smaller amount of money to finance a smaller[...]
  • Introduction Interest rate is the cost of borrowing and the reward for lending. Foreign direct investment refers to direct investment made in the economy by foreign firms. Many students think that a fall in interest rates will lead to an increase in foreign direct investment. Mr. Edmund Quek will engage in a more detailed discussion with the students in economics tuitionĀ on this economic misconception. Exposition A fall in interest rates will lead to a fall in the costs of borrowing. When this happens, the number of profitable planned investments will increase which will induce firms to increase investment expenditure. Investment expenditure comprises investment expenditure made by domestic firms and investment expenditure made by foreign firms which is called foreign direct investment. It is correct to say that a fall in interest rates will lead to an increase in investment expenditure made by domestic firms as they generally borrow in the domestic economy to finance their investments. However, many students think that a fall in interest rates will also lead to an increase in foreign direct investment. This is erroneous. Unlike domestic firms, foreign firms generally do not [...]
  • Introduction Public goods will not be produced in the absence of government intervention. Public goods are goods that are non-excludable and non-rivalrous. A good is non-excludable when it is impossible or prohibitively costly to prevent non-payers from consuming the good once it has been produced. A good is non-rivalrous when the consumption of the good by a consumer will not reduce the amount available to other consumers. Examples of public goods include national defence and street lighting. As public goods are non-excludable, consumers can consume them without paying for them. Therefore, consumers will want to consume public goods without contributing to their production which is known as the free-rider problem. In other words, the non-excludability of public goods leads to the absence of effective demand. Since consumers have no incentive to pay for public goods, private firms which are profit-oriented have no incentive to produce them. Therefore, in the absence of government intervention, public goods will not be produced due to the non-excludability. Furthermore, as public goods are non-rivalrous, the marginal cost of provision, which is the additional cost resulting from pr[...]
  • Introduction The Swiss-based International Institute for Management Development (IMD) ranked Singapore as the second most competitive small economy (population under 20 million) out of 29 economies in 2003. The ranking system was based on four criteria: government efficiency, business efficiency, infrastructure and economic performance. What does this result mean for Singapore?Ā  Does it mean that Singapore can now rest on its laurels? There is no denying that Singapore has had a lot of achievements over the past 40 years since independence in 1965.Ā  However, will Singaporeā€™s neighbours take long to catch up?Ā  Will its hope of becoming the regional hub be extinguished by another Asian country such as Hong Kong, Taiwan or Malaysia? Some people believe that Singapore has come to its second crossroads since 1965. The Asian Financial Crisis, September 11, Bali blast and the Iraq war have changed the competitive landscape for international trade and investment. To thrive, Singapore must abandon the strategy of gaining incremental improvements. They need to make major, fundamental changes in strategies as well as mindsets. Singapore has been in constant transition and transformation. May[...]
  • The following are a list of general articles covering a wide range of topics ranging from economics tuition to game theory. The articlesĀ areĀ meant for leisure reading andĀ are contributed by the Principal Economics Tutor and other renowned experts in the field of economics. General Articles on Economics Tuition Is Economics Tuition Necessary In Singapore? Why Is It Important To Take Economics Tuition From An Experienced Economics Tutor? What Should StudentsĀ ExpectĀ FromĀ Economics Tuition? Why Would Taking Economics Tuition Free Up Time To Study Other Subjects? Can Economics Tuition Improve The Grade In The Examination? Is Government Regulation Necessary in The Tuition Industry In Singapore? What Can A Student Do Before And After Lesson To Maximise Economics Tuition? How Can Economics Tuition Help In Investment? How Can Economics Tuition Help Firms And Consumers Improve Decision Making? Economics Tuition Helps In Making The Right Investments To Hedge Against Inflation How Can Econs Tuition Help Policy Makers In The Government Formulate Better Policies? Are Good Economics Lecture Notes A Close Substitute For Good Economics Tuition? Do Students In Singapore Need Tuition To Excel In The[...]