How Can Econs Tuition Help Policy Makers In The Government Formulate Better Policies?

Econs tuition is very popular with students doing economics in pre-university in Singapore. This is due to the high requirements of the Singapore-Cambridge GCE ‘A’ Level Economics which many students find it difficult to cope. As a result, they have benefitted a great deal from taking econs tuition with a good and experienced economics tutor. However, the usefulness of econs tuition should not be confined to academic studies as it is also useful in many other areas. In particular, economics tuition can help policy makers in the government formulate better policies.

Microeconomic Policies

Although the market system is commonly argued to be better than the command system, the former has several disadvantages. For example, private individuals which include consumers and firms do not take into consideration external costs and benefits which may lead to social inefficiency. If this happens, deadweight loss which is the loss of social welfare will occur.  In econs tuition, one will learn that social efficiency will be achieved when social costs and benefits are taken into consideration. To obtain social costs, one simply need to add external costs to private costs. Similarly, to obtain social benefits, one simply needs to add external benefits to private benefits. When marginal social costs are equal to marginal social benefits, the welfare of society will be maximised and therefore social efficiency will be achieved. Take tobacco for example. When consumers smoke, they produce air pollution in the form of second-hand smoke and land pollution through the littering of cigarette butts. Therefore, without government intervention, consumers will over-consume tobacco as they do not consider externalities. Through econs tuition with a good economics tutor, one will learn that the problem can be solved by imposing a tax on tobacco to induce consumers to internalise the external costs. However, the government should ensure that the tax is neither too high nor too low. More specifically, the government should impose a tax equal to the marginal external cost. If the tax is equal to the marginal external cost, it will help achieve social efficiency in the market.

Macroeconomic Policies

When the economy moves into recession, the demand for labour in the economy will fall which will lead to a rise in unemployment. In order to reduce unemployment, policies to increase aggregate demand, which include expansionary fiscal policy and expansionary monetary policy, can be used. Although both expansionary demand-side policies increase aggregate demand through increasing domestic demand, there are some important differences between the two policies. For example, although expansionary fiscal policy increases government expenditure on goods and services, in addition to increasing private expenditure, expansionary monetary policy only increases private expenditure. This makes the latter rather ineffective in times of weakening sentiment. If households are less optimistic about the economic outlook, a fall in interest rates is unlikely to increase consumption expenditure due to the fall in expected future income. Similarly, if firms expect lower returns on planned investments, they are unlikely to increase investment expenditure in spite of a fall in interest rates. With the help of an experienced economics tutor, econs tuition enables one to learn that the problem can be solved by using expansionary monetary fiscal policy in the form of an increase in government expenditure on goods and services as it is a direct injection into the economy which will certainly increase aggregate demand, other things being equal.

Econs tuition is useful to students in Singapore doing the Singapore-Cambridge GCE ‘A’ Level Economics. That said, it will also help policy makers in the government formulate better policies.

Click to Read Next Post

 

economics tuition, back to homepage

Econs Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek