- 4 years ago
- 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 pro[...]
Category archives: Latest Articles
- 4 years ago
- Introduction Income inequity may lead to failure of the free market to allocate some goods and services to the people who need them more. Effective demand is the desire to buy backed by the ability to pay. Ineffective demand is merely the desire to buy not backed by the ability to pay. The free market only responds to effective demand which means that it only distributes goods and services to the people with the willingness and the ability to pay for them. However, the ability to pay for a good does not reflect the need for the good. Therefore, individuals who need some goods and services but do not have the ability to pay for them have to go without the goods and services. In the free market, the prices of goods and services are determined by the market forces of demand and supply. If the income gap is large, high income individuals with a high willingness and ability to pay may push up the prices of some goods and services to the levels which make the goods and services unaffordable to low income individuals with a low ability to pay. This is a matter of concern particularly if the goods and services are necessities. For example, education is a necessity particularly to low incom[...]
- 5 years ago
- 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 tuition 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 [...]
- 5 years ago
- Introduction Substitutes are goods which are consumed in place of one another such as Coke and Pepsi. The cross elasticity of demand (XED) for a good with respect to another good is a measure of the degree of responsiveness of the demand for the first good to a change in the price of the second good, ceteris paribus. Many students think that public transport is not a close substitute for private cars for the same reason why private cars are not a close substitute for public transport. This economic misconception will be discussed in economics tuition at Economics Cafe. Exposition Private cars and public transport are substitutes as the two goods are consumed in place of one another. However, although some students argue that the two goods are close substitutes, some students argue that they are not. The truth is, whether private cars and public transport are close substitutes varies from individual to individual. However, the problem is that many of the students who argue that private cars and public transport are not close substitutes have not fully understood the relationship between the two goods. In particular, they think that public transport is not a close substitu[...]
- 5 years ago
- Introduction The demand for a good is the quantity of the good that consumers are able and willing to buy at each price over a period of time, ceteris paribus. The supply of a good is the quantity of the good that firms are able and willing to sell at each price over a period of time, ceteris paribus. In the free market, the price of a good is determined by the market forces of demand and supply. Many students think that a rise in the price of a good will lead to a fall in the demand for the complements. Mr. Edmund Quek will provide a more detailed explanation on this economic misconception in economics tuition. Exposition The price of a good may rise due to a decrease in the supply. A decrease in the supply of a good will lead to a rise in the price resulting in a decrease in the quantity demanded. When this happens, the demand for the complements will fall. The supply of a good may fall due to several reasons. For example, a rise in the cost of production of a good will lead to a decrease in the supply. When the cost of production of a good rises, firms will increase the price at each quantity to maintain profitability. In other words, they will reduce the quantity sup[...]
- 5 years ago
- Introduction The demand for a good is the quantity of the good that consumers are able and willing to buy at each price over a period of time, ceteris paribus. The law of demand states that there is an inverse relationship between price and quantity demanded. When the price of a good falls, the quantity demanded will rise. Conversely, when the price of a good rises, the quantity demanded will fall. The quantity of a good that consumers are able and willing to buy at each price can be shown by the demand curve. The demand curve shows the quantity demanded at each price and is downward sloping due to the law of demand. Many students think that when consumers buy more of a good, the demand curve will shift rightwards. Mr. Edmund Quek will provide a more detailed explanation in the economics tuition class on this economic misconception. Exposition Consumers may buy more of a good due to a change in a non-price determinant of demand. In other words, quantity demanded may increase at the same price. This is called an increase in demand and is shown by a rightward shift in the demand curve. There are several non-price determinants of demand that may lead to an increase in [...]
- 6 years ago
- Introduction The production possibility curve (PPC) shows all the possible combinations of two goods that can be produced in the economy when resources are fully and efficiently employed, given the state of technology, assuming the economy can only produce the two goods. An increase in the production capacity in the economy will lead to an outward shift in the PPC resulting in a decrease in scarcity, and vice versa. When the PPC shifts outwards, some of the points which were previously unattainable will become attainable. The production capacity in the economy may increase due to an increase in the quantity or the quality of the factors of production in the economy. For example, education and training which will lead to greater human capital will increase the skills and knowledge of labour and hence the production capacity in the economy. Research and development which will lead to technological advancement will increase the efficiency of capital and hence the production capacity in the economy. Many students think that a decrease in investment expenditure will lead to an inward shift in the production possibility curve. Mr. Edmund Quek will provide a more detailed explanation[...]
- 9 years ago
- 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 res[...]
- 12 years ago
- 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? 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. However, will Singapore’s neighbours take long to catch up? 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. Mayb[...]
- 13 years ago
- The following are a list of general articles covering a wide range of topics ranging from economics tuition to game theory. The articles are meant for leisure reading and 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 Students Expect From 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[...]