A-Level/JC/H2/H1 Economics Tuition Singapore JC/H2/H1 Economics Tutor

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H2 Economics Tuition Students

Tackling H2 Economics Essay Questions – A basic framework
By Ms Chai

1. Exam Format

Paper 2 consists of Essay Questions where candidates are required to answer a total of 3 essay questions. The time allowed for Paper 2 is 2 hours 15 minutes. Paper 2 accounts for 60% of your final grade.
Each essay question will carry 25 marks. An essay question may be a full question by itself or it may consist of 2 sub-questions. The division of marks between the 2 sub-questions normally is (i) 10 and 15 or (ii) 12 and 13. You may be given a little stimulus material before the question.

2. Your Goal for Each Essay Question

Level 3 competency (bordering between grade B and grade A):

• Thorough knowledge of facts and theory with an excellent ability to describe and explain this in a precise, logical, reasoned manner;

• Ability to query some of the assumptions;

• New illustrations and examples appropriate to the material discussed should be introduced as further evidence of the ability to recognise the principles of the question and their application to relevant current situations. To earn an A, you have to go this extra mile :

• Present judgment based on analysis.

3. Essential Skills

Your examiners will be looking for the following skills in your essay :

• Basic Skills
o Knowledge
o Comprehension

• Higher Order Skills
o Application
o Analysis
o Evaluation

From A Level Economic Admin

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H2 Economics Tuition Students

Microeconomics Topic 1.2 : Resource Allocation in Competitive Markets

1 Economic Objectives and Economic Choice

1.1 Economic Objectives

In market economies, the economic objective is to achieve Economic Efficiency. Economic Efficiency is a situation where each good is produced at the minimum cost and where individuals and firms get the maximum benefit from their resources. For a society to achieve Economic Efficiency, it must achieve both Productive Efficiency and Allocative Efficiency.

• Productive Efficiency is efficiency in production. This is where production of each item in the economy is at minimum cost. Producing any other way would cost more.

• Allocative Efficiency is where the society has allocated its scarce resource to producing the combination of goods and services so that the satisfaction derived by the society in consuming the goods and services produced is maximum.

! Stop and Think : Are there non-economic objectives?

1.2 Economic Choice

1.3 Economic Systems
1.3.1 The Centrally Planned / Command Economy (less emphasis)
1.3.2 The Market Economy (Key emphasis)
1.3.3 Mixed Economies

Economic choice and systems will be discussed during the lesson

A Level Economics Tuition – Admin

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Topic 1.2 : Resource Allocation in Competitive Markets Part 3 – Applications

H2 Syllabus :
Application of demand and supply analysis to various markets.
• Concept of elasticity of demand and supply
• Factors influencing the elasticity of demand and supply in the short-run and long-run

H2 Learning Outcome :
• Apply knowledge of basic model of demand and supply to various markets.
• Explain elasticity concepts and its applications e.g. an understanding of why and how changes in prices of a product affect the business sales and revenue.

H1 Syllabus :
• Price elasticities of demand and supply

H1 Learning Outcome :
• Explain the concepts of price elasticities of demand and supply
• Explain the factors affecting price elasticities of demand and supply
• Discuss real-world applications of demand and supply analysis

A Level Economics Tutors

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Topic 1.2 : Resource Allocation in Competitive Markets Part 3 – Applications

1.1 Definition of Elasticity of Demand

Elasticity of demand is a measure of the responsiveness of quantity demanded to a change in one of its determinants, ceteris paribus. The determinants may be (i) its price or (ii) income or (iii) price of another good.

1.2 Price Elasticity of Demand

The Price Elasticity of Demand measures how much the quantity demanded responds to a change in its price, ceteris paribus. Demand for a good is said to be price elastic (Ed > 1) if the quantity demanded responds more than proportionately to changes in the price. Demand is said to be price inelastic (Ed < 1) if the quantity demanded responds less than proportionate to changes in the price.

The flatter the demand curve that passes through a given point, the greater the price elasticity of demand. The steeper the demand curve that passes through a given point, the smaller the price elasticity of demand.

1.3 Computing the Price Elasticity of Demand

Price Elasticity of Demand, Ed = % Change in Quantity Demanded / % Change in Price

Important Note 1: Ed ≠ Change in Quantity Demanded / Change in Price

Because the quantity demanded of a good is negatively related to its price, the percentage change in quantity will always have the opposite sign as the percentage change in price. For this reason, price elasticities of demand are sometimes reported as negative numbers although common practice is to take the absolute value.

Perfectly Price Inelastic Demand : Ed = 0
Price Inelastic Demand : Ed 1
Perfectly price Elastic Demand : Ed = Infinity

! Stop and Think : Do you how to graph the various price elasticities?

! Stop and Think : How do you interpret a price elasticity of demand coefficient of 1.5?

What about 0.8?

For complete discussion, please contact Mr Ong @9863 9633

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J2 H1/H2 Economics Tuition Students

March Lesson Plan

March 16 — Revise macroeconomic policies via the use of case studies and essays. The policies covered include fiscal policy, monetary policy, exchange rate policy and supply side policies, together with their limitations and evaluations. We will also look at how these policies are implemented and to what extent are they useful to Singapore’s context.

March 23 — Revise microeconomic policies via the use of case studies and essays, (Subjected to changes, depending on progress of previous class and topics to be tested in March Block Test of various JCs)

March 30 — Revise important macroeconomic concepts — mulitplier, theory of comparative advantage, AD-AS and four macroeconomic goals, meaning of national income, BOP and its contents, Marshal-Lerner Condition, J-curve effect, and crowding out effect.

A-level Economics Tutor

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Topic 2.2 : Government Intervention in the Market

H2 Syllabus :

• Methods by which government intervene in markets and the impact on market outcomes

H2 Learning Outcome :

• Examine the various methods by which governments intervene in markets
1. Welfare
1.1 Consumer Surplus
Consumer surplus is the gain by consumers when they pay less for a good or service than they had been prepared to pay for it. It can be calculated by taking the difference between (i) the total amount that consumers are willing and able to pay for a given quantity of good or service and (ii) the total amount that they actually pay for that same quantity of good or service.

The demand curve for a good or service not only shows us the quantity of good or service that consumers would buy at each price. It also shows the highest price consumers are prepared to pay for that particular unit of good or service.

Take the example of the demand for potatoes below :
Points Price ($ per kg) Total market demand (kg)
A 2 44
B 4 26
C 6 14
D 8 8
E 10 6
The consumers are prepared to pay $10 per kg for the first 6 kg of potatoes, but only $8 per kg for the next 2 kg of potatoes. The consumers are prepared to pay $6 per kg for the next ______kg of potatoes, $4 per kg for the next ______ kg of potatoes and $2 per kg for the next ______ kg of potatoes.

! Stop and Think :
How much are the consumers willing to spend for the first 6 kg of
potatoes? How much are they willing to spend to buy 8 kg of potatoes? How much are they willing to spend to buy 14 kg of potatoes?

If the market equilibrium price is $6 per kg, how much will the consumers pay in total for buying 14kg of potatoes?

Total Amount Spent by Consumers to buy 14 kg of potatoes = 6 X 14 = $84

Total Amount Consumers are willing to pay for 14 kg of potatoes
= (10 X 6) + (8 X 2) + (6 X 6) = $112

Consumer Surplus = 112 – 84 = $28

Consumer Surplus = Total Amount that Consumers are Prepared to Pay
– Total Amount that Consumers actually Paid.

Depicting this graphically, consumer surplus is the area under the demand curve and above the market equilibrium price.

For complete lesson notes please contact Mr Ong 29863 9633

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J2 H1/H2 Economics Tuition Students

Lessons plan for the month of Apr

April 6th: We will cover intricate details of supply-side policies, exchange rate policies. At the end of the lesson, the students will be able to understand how these policies solve economic problems of recession, unemployment, balance of payment imbalances and price instability. In addition, students will also appreciate their limitations and relative advantages compared to other policies in the context of Singapore

April 13th: In this lesson, we will spend considerable time understanding the full range of macroeconmic policies undertaken by Singapore’s government. At the end of this lesson, students will be able to answer A level questions requiring contextual knowledge regarding the local economy.

April 20th: This session will mark the beginning of another revision cycle. We will revisit the concepts, polices and formulae that was previously covered in past months, but with greater attention paid to real life examples. Students will be exposed to a rich content of case studies, which attempt to illustrate how macroeonomic concepts are used in real policy making processes. At the end of the lesson. students will have gain not only an awareness of how concepts are applied, but also when these concepts can be applied in A level questions.

April 27th: We will continue from where we left on April 20th.

In each session, students will receive a Content Package that summarises the key concepts, including real examination questions with full answers. This will ensure that students receive a balance between content and actual practice.

Finally, students are entitled to submit their essays, case studies attempts to the tutor for grading and evaluations. Students can expect to receive useful comments and learn important examination techniques through this consultation process.

From A Level Economics Tutor

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Concept Lesson #3

Types of Macro Policies and Transmission Mechanism

I) Fiscal Policy

(1) POSSIBLE Definitions

(i) Fiscal policy in general refers to the use of government spending and
taxation to influence the pattern of economic activities, and also the level of output, employment, aggregate demand and aggregate supply. The
objectives is to achieve various economic goals, both micro and
macroecnomic.

(ii) An expansionary fiscal policy in general involves the discretionary increase in government spending in selected areas and/or reduction in selected tax rates. The effect is to raise the AD and boost output and employment, thus helping to achieve actual growth and fall in cyclical unemployment. Such a policy can have an effect on both the SRAS and LRAS as well.

(iii)A contractionary fiscal policy in general involves the discretionary decrease in government spending in selected areas and/or increase in selected tax rates. The effect is to reduce the AD which can control demand pull inflation through fall in output, thus helping to achieve the objective of stable prices

(2) Transmission Mechanism for EFP
See Diagram 1

(3) Evaluation/Limitations for EFP
(a) Budget Deficit and Debt to GDP Ratio
(b) Crowding Out Effect
(c) Consumer Pessimism and increase household savings
(d) Ricardian Equivalence and increase household savings
(e) Investor Pessimism and increase in corporate savings
(f) High export dependence and
(g) Small multiplier and high leakages
(h) Demand-Pull Inflation (Trade-off between growth and price stability)
(i) Philips Curve (Trade-off between inflation and unemployment)
(j) Opposing income and substitution effects on work efforts due to lowering of taxes
(k) Irreversibility of fiscal spending on welfares, infrastructures
(l) Zombie industry and allocative inefficiency
(m) Market Failure and Allocative Inefficiency
(n) Positive Effects on LRAS
(o) Positive Effects on SRAS
(p) Positive Effects on Sustainable Growth and Comparative Advantage

For complete concept lesson, please contact 9863 9633

A Level Economics Tutors

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Microeconomics Topic 2.2 : Government Intervention in the Market : Taxes and Subsidies

H2 Syllabus :
• Methods by which government intervene in markets and the impact on market outcomes

H2 Learning Outcome :
• Examine the various methods by which governments intervene in markets

H1 Syllabus :
• Policies to correct market failure : Taxes and Subsidies

H1 Learning Outcome :
• Analyse how governments intervene through imposition of taxes, subsidies.

1. Taxes

1.1 Definition
Taxes are money that the government takes from households and firms in order to pay for its own functioning and public projects.

1.2 Types of Taxes
Taxes may be direct or indirect :
• Direct Taxes – Taxes on income and wealth. Examples include personal income tax,
corporate tax.
• Indirect Taxes – Taxes on expenditure. Examples include excise duties on alcohol, petrol etc.
Indirect Taxes may be imposed on consumers or on producers although in most analysis, the focus is indirect taxes on producers.

Indirect taxes may be specific tax or ad valorem tax :
• Specific Tax – sometimes known as Lump-Sum Tax is a fixed amount of tax per unit of good or service. E.g. tax per litre of petrol, tax per litre of wine.
• Ad Valorem Tax – tax based on a percentage of the price or value of the good or service. E.g. Goods and Services Tax.

For complete lesson notes, please contact 9863 9633

A Level Economics Tutors

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

We are starting new class – J1 H2/H1 Economics this Sunday 21 Apr.
Timing 9 am to 11 am
For enquirers please contact Hp 9863 9633 or Hp 9679 0479
———————————————————————

Microeconomics Topic 1.3 : Firms and How They Operate 1

H2 Syllabus :

• Objectives of firms
o Profit Maximisation
o Alternative Objectives

• Costs of production
o Short run vs Long run
o Fixed cost vs variable cost

H2 Learning Outcome :
• Understand the concept of profit as the difference between total revenue and total cost
• Understand that firm make price and output decisions based on the marginalist principle

1.1 Production

Production is the process of combining inputs to make goods and services.

Recall that the Production Possibilities Curve (PPC) tells us combinations of the maximum quantity of outputs that an economy can produce at a given technology.

For a firm, its Production Function gives the maximum quantity of output it can produce over some period of time for each different combination of inputs.

When a firm uses many different inputs, production functions can be quite complicated. This is true even of small firms. For economic analysis, we often assume firms use only two inputs i.e. Capital and Labour.

Different Combinations of Inputs
Production Function
Different Quantities of Output

1.2 Short Run Vs Long Run

When a firm changes its level of production, it will want to adjust the amounts of inputs it uses. But these adjustments depend on the time horizon the firm’s managers are thinking about. Some inputs can be adjusted relatively quickly. Most firms, for example, can hire more labour and purchase more raw materials within a few weeks or less. But at many firms, there are some inputs that can be adjusted only after a long time interval. For example, it may take a year or longer before an automobile firm can purchase and install new, fully equipped assembly lines, or
acquire additional factory space.

For complete lesson notes, please contact 9863 9633 or 9679 0479

A Level Economics Tutors

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J2 H1/H2 Economics Tuition Students

The Singapore’s Economy

Important Characteristics
1. Small
2. Open
3. Market-oriented economy

Important Macroeconomic Policy Framework of Singapore
1. Exchange Rate Centered Monetary Policy – To maintain price stability.

i) Reading 1

2. Free Trade Policies, geared increasingly towards emerging economies – To achieve economic growth and healthy BOP

i) Reading 2

3. Supply side policy centered on labor market flexibility, labor quantity/quality (Interventionistic) and market privatization/deregulation (market-oriented) – to boost productive capacity and competitiveness, achieving sustainable growth and price stability.

Linking characteristics to policies:

1. Why exchange rate centered monetary policy and not interest rate centered monetary policy?
2. Why free trade policies and not protectionism? Why increasingly geared towards emerging economies such as G3, ASEAN and China?
3. Why supply side centered fiscal policy and not demand side centered?
4. Why supply side policies involving labor market flexibility, labor quantity/quality, deregulation and privatisation?

Additional Readings:

1. Monetary Policy Framework in Singapore, by Monetary Authority of Singapore, Economic Policy Department, Pages 3-6.
2. Global Demand Growth from Singapore’s Perspective, by Ministry of Trade and Industry, Economic Survey of Singapore 2010.

For complete lesson notes, please contact 9863 9633 or 9679 0479

A Level Economics Tutors

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Tutorial 4 – Case Study

Question 1 Demand and supply imbalances in the UK energy market
In the 1990s the UK government took a number of steps to privatise the market for energy. Natural gas and electricity are the most popular domestic fuels in the UK and the markets for both were deregulated to allow greater competition. The aim was to give customers lower prices and greater choice between suppliers. Two organizations were created to ensure benefits for the consumer. The Office of Gas and Electricity (Ofgem)
was given responsibility for ensuring that the markets were competitive. Energy watch was established in November 2000 to represent the interests of consumers. Consumers now purchase their gas and electricity from a small number of private sector suppliers.

Extract 1 : Gas warning : not enough to meet demand

A warning was issued yesterday that the UK was in danger of not having enough natural gas to meet demand. The warning sent prices spiraling up fourfold. The UK gas market has been caught out because the country’s only significant gas storage facility is out of action because of a fire. Centrica, the company that runs the facility, said that it could not
be sure when it would get the supply facility back into action. Despite this problem, which could lead to some manufacturing companies having their supplies cut off, there has been little increased supply from outside the UK from countries such as the Netherlands where gas is still plentiful. In the UK the price of gas hit 250 pence per unit yesterday, which is three times more than in the Netherlands, but the gas pipeline
connecting the UK to suppliers in the Netherlands was only running half-full. Although some large industrial users might have to forgo supplies, residential consumers have been promised that no further residential price increases are planned at this time. British Gas, the company that supplies 53% of the residential gas market, increased prices by 12% in September 2004 and a further 36% by March 2006. Many gas users have switched to alternative fuels. Electricity prices have also been increased by 18.4%
by a leading supplier while most other suppliers have increased prices, but by smaller amounts.

UK politicians have criticized other governments in Europe for their slowness in deregulating energy markets. Yesterday the price of wholesale gas in the Netherlands was, as low as 70 pence per unit. A new pipeline carrying suppliers from Norway is expected to begin operations in October.

Source : Guardian Unlimited, 14 March 2006

For complete assignment, please contact 9863 9633 or 96790479

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J2 H1/H2 Economics Tuition Students

Reading Materials for Inflation

SHOE-LEATHER COST of Inflation

One real cost is when individuals spend time and other resources fighting the effects of inflation. This creates a dead weight loss since now real variables are being diverted from a productive use to reducing the effects of inflation. Shoe leather cost refers to the cost associated with the time and efforts (more specifically the opportunity cost of time and energy) that people spend trying to counter-act the negative effects of inflation (Figure 0). For instance, in periods of inflation, if an individual holds cash in hand they will be subject to the inflation tax. To help reduce the effect of the inflation tax on their money holdings an individual might decide to deposit more of their cash into an interest bearing account at their bank. The term “shoe leather cost” comes from the fact that more walking is required (historically, although the rise of the Internet has reduced it) to go to the bank and get cash and spend it, thus wearing out shoes more quickly, and consequently spending more money on shoes. The actual cost of reducing money holdings is the additional time and convenience that must be sacrificed to keep less money on hand than would be required if there were no inflation.

As an example, Bolivia experienced its worst inflation between 1984 and 1986. Before 1984, the highest denomination was 1,000 pesos bolivianos. By 1985, the highest denomination was 10 million pesos bolivianos. In 1985, a Bolivian note for 1 million pesos was worth 55 cents in U.S. dollars, one-thousandth of its exchange value of $5,000 less than three years previously. In the 1987 currency reform, the peso boliviano was replaced by the boliviano at a rate of 1,000,000:1.

The Bolivian government was so far in debt that it was no longer credit worthy to sell bonds internationally or domestically. They began to sell bonds directly to the Bolivian central bank to pay public workers. These injections of un-backed pesos into the market drove down the value of pesos and increased the price of food and other goods and led to hyperinflation. The hyperinflation in Bolivia reached its peak in July 1985 when the value of U.S. $1 equaled two million pesos, the inflation had increased by 3,000% in only a year.

The hyperinflation was only made worse by the sale of U.S. dollars on the black market. An example of shoe leather costs from this time is when Bolivians spend time and energy trying to convert their pesos bolivianos into a more stable currency, the U.S. dollar. They were diverting resource away from a productive use that would create value in the economy. The value of those diverted resources is a real cost of inflation.

From A Level Tutor

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J2 H1/H2 Economics Tuition Students

Common Mistakes/Tips of the Week

1. Introduction of CSQ questions = must elaborate/explain/state what you know about the context.

2. Important cue words in CSQ:

i) Managing an economy: This means you must talk about BOP, Employment, Inflation and Growth where possible.
ii) Protectionist measures: This means you must talk about the specific measures, instead of just referring it to protectionist measures as a whole.
iii) Global recession: This means that you must talk BOP with specific reference to BOT especially for export reliant economies, cyclical employment and negative economic growth.

3. Quote examples from CSQ

4. Fall in M can lead rise in AD

5. Wrong: Increase in BOP.

From A Level Economics Tutor

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A-Level Economics Tuition Singapore/H2/H1 Economics Tuition

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Topic 1.3 : Firms and How They Operate 1

H2 Syllabus :

• Costs of production
– Internal vs external economies and diseconomies of scale

. Returns to Scale
Definition of Returns to Scale : The impact on output due to changes in input.

3 Types of Returns to Scale :
– Constant Returns to Scale : A given percentage increase in inputs will lead to the same percentage increase in output.
– Increasing Returns to Scale : A given percentage increase in inputs will lead to a larger percentage increase in output.
– Decreasing Returns to Scale : A given percentage increase in inputs will lead to a smaller percentage increase in output.

IMPORTANT NOTE : “To Scale” means all inputs increase by the same proportion.

! Stop and Think : Is there a difference between decreasing returns to scale and diminishing marginal returns?

2. Linking Returns to Scale and Average Cost
A firm experiences economies of scale if costs per unit of output fall as the scale of production increases. If a firm is getting increasing returns to scale from its factors of production, then as it produces more it will be using smaller and smaller amounts of factors per unit of output. Other
things being equal, this means that it will be producing at a lower unit cost or average cost.

Conversely, if a firm is getting decreasing returns to scale from its factors of production, then as it produces more it will be using bigger and bigger amounts of factors per unit of output. Other things being equal, this means that it will be producing at a higher unit cost or average cost.

For complete please contact Mr Ong @9863 9633

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