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/J2 H1/H2 Economics Tuition Students

J2 Lesson Plan – Sat 7.30 pm to 9.30 pm

4th May 2013: Revision of Monetary Policy and Market Structure Concepts.

11th May 2013: Revision of Fiscal Policy and Market Structure Concepts

18th May 2013: Revision of National Income Multiplier, Market Structure and Market Failure Concepts

25th May 2013: Revision of Theory of Comparative Advantage, Market Failure, Applications of Elasticity Concepts

J1 lesson Plan – Sunday 9 am to 11 am

5th May 2013: Learning of Price Ceiling, Subisidies on producers and consumers, and concepts on the different kinds of cost of production.

12th May 2013: Learning of concepts on Internal and External Economies of Scale

Further plans for JC 1 to be confirmed again, depending on topics that will be tested in MID YEAR.

From A Level Tutor

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

Hi J1 H1/H2 Economics Tuition Students
Monday 7pm to 9pm class

Plan for May and June 2013

Every 2 hour class is usually divided into 1 hour of seminar teaching and 1 hour of tutorial.

As we finish our discussion on firm costs, we will carry on to explore how firms behave. How firms behave depends on the structure of the marketplace they are in. In particular, we would like to know :

• What are the key distinguishing features of the various market structures?
• To what extent the market structures will affect the demand curves faced by firms?
• What are the profit possibilities of the firms in the short run and in the long run?
• Will the firms produce a high level of output or a low level?
• Will the firms be producing efficiently?
• Are the prices charged by the firms too high or too low?
• Are there differences in how firms compete due to different market structures?
• Do societies benefit or lose out because of the different market structures?

The focus of the seminar teaching will be (i) Perfect Competition; and (ii) Monopoly in the month of May followed by (iii) Monopolistic Competition and (iv) Oligopoly in the month of June depending on the pace of the class.

In between seminar teaching, the class will continue to get essay writing and case study practices using previous years’ A level examination questions and top JC tests/examinations questions. The topics will include what we have covered since Jan (Scarcity, Choice and Opportunity Cost; Resource Allocation in Competitive Markets (aka Demand, Supply, Market Equilibrium and the various Elasticities); Firm Costs; Market Structure) to help students to prepare for their first common test after the June holidays.

From A Level Economic Tutor

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

Hi J1/J2 H1/H2 Economics Tuition Students

Fixed and Variable Costs: Why it matters?

Extract 1:
A company with a relatively large amount of variable costs may exhibit more predictable per-unit profit margins than a company with a relatively large amount of fixed costs. This means that if a firm has a large amount of fixed costs, profit margins can really get squeezed when sales fall,
which adds a level of risk to the stocks of these companies. Conversely, the same high-fixed-costs company will experience magnification of profits because any revenue increases are applied across a constant cost level. Thus, as you can see in the example, fixed costs are an important part
of profit projections and the calculation of break-even points for a business or project.

In some cases, high fixed costs discourage new competitors from entering a market and/or help eliminate smaller competitors (that is, fixed costs can be a barrier to entry). Typical fixed costs differ widely among ndustries, and capital-intensive businesses have more long-term fixed costs than other businesses. Airlines, auto manufacturers, and drilling operations usually have high fixed costs. Businesses focused on services like website design, insurance, or tax preparation generally depend on labor rather than physical assets and are thus don’t have as many fixed costs. This is
why comparison of fixed costs is generally most meaningful among companies within the same industry, and investors should define “high” or “low” ratios within this context.

Extract 2:
Knowing your fixed costs can help manage your business more effectively. Businesses with high fixed costs will have different strategies for managing their business than those with high variable costs.
Expenses are generally categorized as either fixed or variable. Fixed costs are the expenses that are incurred regardless of how much is sold or how much is produced. Some typical examples of fixed costs are lease payments, insurances and mobile phone cap. Variable costs are the expenses
that vary depending on your sales or activity level. Variable costs include expenses such as electricity, phone call charges and subcontractors. Businesses with high fixed costs need to consider some of the following points when managing their business:

 Their breakeven point will start higher than a business with high variable costs. Therefore, pricing strategies may need to focus on volumes and not margins. A webinar, e-book or hosting a seminar are examples where this may apply.

 Similarly, the business will need to make sure they sell enough to cover at least their fixed expenses. A business can achieve this by fixing its revenue stream. For example, the mobile phone industry signs customers to a 24 month plan or a consultant seeking a retainer.

 Higher fixed costs may lead the business to be less flexible to changing conditions. In an economic downturn, the business may have increased risk or financial pressures if the business cannot reduce the fixed costs as quickly as the drop in revenue.

 Conversely, in a growing market there is the opportunity to make higher profits. Once sales have exceeded the fixed costs then further sales will go straight to the bottom line. The business may seek a different market or pricing strategy to increase sales.

From A Level Economic Tutor

[adminMember]

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

Hi J1/J2 H1/H2 Economics Tuition Students

Microeconomics Topic 1.3 : Firms and How They Operate 1 – Perfect Competition

H2 Syllabus :
• Spectrum of market competition
o Features of the different market structures
o Barriers to entry
o Comparison on the basis of productive and allocative efficiency, equity,
innovation and consumer choice

H2 Learning Outcome :
• Explain the key features of each of the market structures.
• Explain how firms compete in the respective market structures based on their features.
• Understand the relevance of barriers to entry in explaining differences between market structures
• Apply these models in analyzing and comparing markets and evaluate their usefulness as explanations of real world competitive behavior.
• Use the concept of profits to illustrate real world competitive behavior of firms in protecting their profits.

1. What is a market in Economics?
A market is a group of buyers and sellers of a particular good or service.
Markets may be organized or not but it is still a market.

Example of an organized market : Agricultural commodities. Buyers and sellers meet at a specific time and place, where an auctioneer helps set prices and arrange sales.

Example of a market that is not organized : Ice cream along Orchard Road. Buyers of ice cream do not meet together at any one time. The sellers of ice cream are in different locations along Orchard Road and offer somewhat different products e.g Kings brand, Walls brand etc but they are still ice cream. There is no auctioneer calling out the price of ice cream. Each seller posts a price for ice cream at the mobile kiosk, and each buyer decides how much ice cream to buy at each kiosk.

There are four common forms of markets or market structures, namely, Perfectly Competitive, Monopoly, Oligopoly and Monopolistic Competition.

For complete lesson notes please contact @9863 9633

From A Level Economic Tutor

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

Hi J1 H1/H2 Economics Tuition Students

Microeconomics Tutorial 8 : Concept Teasers

1. Why does a light come on when you open the refrigerator but not when you open the freezer?

Economic Concept(s) :

Explanation :

2. Why do many bars charge customers for water but give them peanuts for free?

Economic Concept(s) :

Explanation :

3. Why do new luxury cars account for a higher proportion of cars sold in Singapore than in the US?

The average income in Singapore is about the same as in the US, and the income distributions in the 2 countries are about the same too. Yet, BMW, Mercedes and other luxury manufacturers enjoy a much higher market share in Singapore. This becomes more pronounced when COE prices are high. Why are Singaporeans more likely to buy luxury cars?

Economic Concept(s) :

Explanation :

For answer of this lesson notes please contact @9863 9633

From A Level Economic Tutor

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

Hi J2 H1/H2 Economics Tuition Students

Common Mistakes/Important Comments of the Week

1) CSQ Question:
In light of the data provided, assess the relative success of Germany and Greece in recovering from a global financial crisis. [8]

2) This questions requires these 3 questions to be answered:
a) “Relative success” = Which country is more successful and in terms of what goals?
b) “Assess” = Why is that country more success than the other? Give the
economic analysis using AD-AS
c) “Recovering” = Will this country continue to be successful into the future?

3) None of you clarified “success” in terms of the four macroeconomic goals. In the
end, most of you seem to take the meaning of success as “who has higher AD and higher economic growth”

4) Very few of you clarified the year when GLOBAL FINANCIAL CRISIS occurs. Its 2007.
None of you clarified the nature of this crisis. In the introduction, should mention:
a) Global financial crisis occurred in 2007 and lasted throughout 2007 and
2008
b) Involves collapse of banks and rise in unemployment globally
c) Results in global decline in AD.
d) Hence in comparing which country is and will be more successful in
recovering, we consider 3 key macroeconomic goals of growth, employment
and balance of trade. In addition, since the nature of the crisis is to cause a fall in AD, the success will depend on both Germany and Greece ability in managing the different components of AD.

5) Very few of you wrote anti-thesis for Germany

For complete comments please contact @9863 9633

From A Level Economic Tutor

[adminMember]

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

Hi J2 H1/H2 Economics Tuition Students

Common Mistakes/Important Comments of the Week

1. CSQ Question:
Discuss whether the government should intervene given Apple’s “ever-more
dominant position”

2. Interpretation of „ever-more dominant position” was generally well done and supported by case materials. Students should take note of the following comments:

a) Ever-more dominant position does not mean earning more supernormal profits.
One of you made quite a lot of effort to quote the profits from extract 4 as an evidence of this.

b) Ever-more dominant position means an increasing market share, and
increasing ability to control market share by raising barriers to entry. I don‟t think anyone did link this to BTE.

3. Merits and demerits of monopoly were generally well done and supported by case materials. Students should take note of the following comments:

a) A large firm such as Apple can achieve dynamic efficiency because of their ability to retain supernormal profits, contestable markets, imperfect knowledge and high barriers to entry due to patented technology.

Students who wrote on dynamic efficiency failed in one or more of the following aspects:
(i) Students can only link dynamic efficiency to supernormal profits and
contestable market, but failed to see the link with imperfect knowledge
and high barriers to entry.
(ii) Some link dynamic efficiency to more variety of goods, but failed to point
out that dynamic efficiency also involve process innovation where LRAC
shifted downwards, thus translating into lower prices for consumers.

b) A large firm such as Apple can achieve internal economies of scale through construction of large plants overseas, as mentioned in Extract 4, thus reaping the technical economies of scale via the indivisibility of large capital equipment. I find that some students has failed this thesis in one or more ways:
i) Wrote “economies of scale”. Should have written “internal
economies of scale”
ii) Wrote internal economies of scale but never mention what type.
iii) Wrote all sorts of economies of scale such as risk bearing, financial,managerial which are not case supported.

c) A large firm such as Apple will attempt to restrict output and raise prices to maximize its profits. It will result in a pricing behavior where P > MC, leading to allocative efficiency. Students who discussed the allocative inefficiency issues has failed in one or more of the following ways:
(i) No explanation as to why P > MC is allocative inefficiency
(ii) Only one of you bothered to compare with PC, using diagram.
(iii) No mention of deadweight loss, but too many of you use vague
terms such as “exploited”, “suffer” etc.

4. The case against government intervention was generally well done and correct quotes from the csq were given. However, it was not perfectly done due to a lack of rigor:

a) From extract 3 paragraph 4, “should authorities play around” … “it could be dangerous”. This can linked to an important economic concept known as imperfect knowledge.

5. Other miscellaneous remarks:
a) One of you mentioned that Apple might grow complacent and thus have no
incentive to cut costs, leading to productive inefficiency. No case materials to support such claims. In fact, I argue that Apple has been trying their best to employ workers overseas, which shows that it is putting in every effort to lower unit costs.
b) Some of you drew the Monopoly diagrams wrongly by indicating normal or
subnormal profits.
c) One of you did not know the concept of AE.

For complete comments please contact @9863 9633

From A Level Economic Tutor

[adminMember]

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 – Monopoly

H2 Syllabus :
• Spectrum of market competition
o Features of the different market structures
o Barriers to entry
o Comparison on the basis of productive and allocative efficiency, equity, innovation and consumer choice

H2 Learning Outcome :
• Explain the key features of each of the market structures.
• Explain how firms compete in the respective market structures based on their features.
• Understand the relevance of barriers to entry in explaining differences between market structures
• Apply these models in analyzing and comparing markets and evaluate their usefulness as explanations of real world competitive behavior.
• Use the concept of profits to illustrate real world competitive behavior of firms in protecting their profits.

1. Definition of a Monopoly

A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes. The fundamental cause of monopoly is barriers to entry : A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it. Other reasons that a firm is a monopoly include imperfect knowledge.

2. Why Monopolies arise?

(a) A key resource is owned by a single firm

The simplest way for a monopoly to arise is for a single firm to own a key resource. For example, if there is only one well in town and it is impossible to get water from anywhere else, then the owner of the well has a monopoly on water.

Note however, that there are few examples of firms in the world that own a resource for which there are no close substitutes.

For complete comments please contact @9863 9633

From A Level Economic 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 – Oligopoly

H2 Syllabus :
• Spectrum of market competition
o Features of the different market structures
o Comparison on the basis of productive and allocative efficiency, equity, innovation and consumer choice

H2 Learning Outcome :
• Explain the key features of each of the market structures.
• Apply these models in analyzing and comparing markets and evaluate their usefulness as explanations of real world competitive behavior.

1. Firm Behaviour of an Oligopolist

How an oligopoly will behave depends on (i) the payoffs between cooperation with its rivals and cheating its rivals; and (ii) the actions and reactions of its rivals. As a result, how firms behave in an oligopoly market may be classified into 2 broad categories, namely :

• Collusive or Cooperative Oligopoly
• Non-collusive or Competitive Oligopoly

Collusive or Cooperative Oligopoly may be outright or tacit.

To illustrate the above 2 behaviours, we use the following example :

We will take the simplest Oligopoly market structure i.e. a duopoly which is a market of two sellers, Seller A and Seller B.

Suppose the following is the market demand and price of petrol.

Assumptions :

• 2 sellers with unequal market share
• Total cost of a seller with a bigger market share = (Market Share X Total Cost) -1
• Total cost of a seller with a smaller market share = (Market Share X Total Cost) + 1

Note 1 : Total Cost is Column 5 below.
Note 2 : Market Share of Seller = Production of Seller / Total Production

For complete comments please contact @9863 9633

From A Level Economic Tutor

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

Hi J1 H1/H2 Economics Tuition Students

H1 Syllabus :
• Market Failure
o Public, Merit and Demerit Goods

H1 Learning Outcome :
• Explain the characteristics of public goods and why public goods are not provided by the market.
• Explain the characteristics of merit and demerit goods and why they result in under and over consumption.

Lecture 2 : Market Failure – Causes Part 2 (Merit, Demerit and Public Goods)

1. Merit Goods and Demerit Goods

Merit goods are private goods which the government feels people will under-consume without any form of government intervention. Under-consumption can result from imperfect information (i.e. consumers don’t know any better) or positive externalities. Examples include education and preventive healthcare.

Demerit goods are private goods which the government feels people will over-consume without any form of government intervention. For example, demerit goods such as cigarettes and street drugs, impose external costs on the society when consumed. Hence, the government will seek to reduce its consumption in order to reduce the negative externalities involved. Over-consumption of demerit goods can also arise from consumers’ lack of information.

! Stop and Think : Normative economics come into play in merit and demerit goods. Do you know why?

For complete comments please contact @9863 9633

From A Level Economic Tutor

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

Hi J1 H2 Economics Tuition Students

Micro Concept Lesson IV – Price Discrimination and
Allocative Inefficiency

1. Recap:
Characteristics affect behavior of firms, which in turn affects the outcomes/performance of firms.

2. Important Behaviors for the entire market structure syllabus

a) Output behavior
i. Marginalist Approach – produce up to the point where MC = MR

b) Pricing behavior/strategy
i. Price takers
ii. Price setters – P > MC
iii. Price setters – kinked demand theory
iv. Price setters – Price leadership model
v. Price setters – Cartel model
vi. Price setters – Price discrimination!

3. Important Outcomes/Performance
a) Types of Profits Earned by the Firm, in the short and long run
b) Whether it achieves allocative efficiency
c) Whether it achieves productive efficiency
d) Whether it achieves dynamic efficiency

4. WHAT TO MASTER FOR PD?
1) Technical knowledge: Definitions, types, graphs
2) Application knowledge:
i. What characteristics enable a firm to practice price discrimination?
ii. What kind of outcomes does price discrimination produce?

5. Almost everything you need to know about PD
a) General Definition: A pricing strategy/behavior that charges different prices to different group of consumers for the same good or service, for reasons not fully justifiable by costs.

b) General conditions required: differences in price elasticity of demand and barriers to switching sellers. In addition, the market structure should be oligopolistic or monopolistic in nature so that firms have sufficient market power for price setting.

c) General Types:
i. First Degree or Perfect Price Discrimination
 Firm separates market into individual consumer
 Charges the consumer the price they are willing and able to pay
 Firm extracts the entire consumer surplus that lies underneath the
demand curve and turns it into extra revenue or producer surplus
 The marginal revenue curve is now equal to the average revenue
curve.
 The firm subsequently adjusts their output in accordance to the
Marginalist principle.
 LINK TO CHARACTERISTICS: Firms who wish to succeed in practicing
this strategy needs to pay the cost of conducting market research to
obtain perfect knowledge regarding what each buyer is prepared to
pay.
 LINK TO OUTCOMES:
1) Output increases
2) Profits increases  increased ability to practice Dynamic E.
3) Consumer surplus falls to zero
4) AE Achieved Fully
5) Improved PE.

ii. Second Degree or Block Pricing
 Firms sell blocks of a product at different prices depending on the
quantity purchased.
 Prices fall as quantity purchased increases.
 Early-bird discounts (price discrimination by time)
 Outgoing calls by Singtel for calls from Singapore to Philippines

For complete comments please contact @9863 9633

From A Level Economic Tutor

[adminMember]

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

Hi J2 H1/H2 Economics Tuition Students

We are starting a new class on 7th Aug Wednesday 7.45pm to 9.45pm
Lesson will be taught by Bryan Goh

Please contact Angie Hp 96790479 or Mr Ong 98639633 if have more question

[adminMember]

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

Hi J1 H1 Economics Tuition Students

H1 Syllabus :
• Policies to correct market failure
o Direct Provision
o Taxes and Subsidies
o Tradable Permits
o Rules and Regulations
• Effectiveness of Policies

H1 Learning Outcome :
• Analyse how governments intervene through direct provision of goods and services, imposition of taxes, subsidies, tradeable permits, rules and regulations.
• Discuss the effectiveness of these policies in correcting market failure and their limitations.

Lecture 3 : Market Failure and Public Policy – Part I

3.1 Market Failure from the presence of Externalities

In the presence of externalities, society’s interest in a market outcome extends beyond the well-being of buyers and sellers in the market; it also includes the well-being of bystanders who are affected. Because buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply, the market equilibrium is not efficient in the presence of externalities. In the case of a good with positive externalities, there is an under-allocation of resources to its production. In the case of a good with negative externalities, there is an over-allocation of resources to its production.

3.2 Government Intervention or Public Policies to correct Negative Externalities

Policymakers in the government can respond to negative externalities in one of the following ways.

(a) Taxation

A specific i.e. a fixed amount, is tax is charged per unit sold or produced. Alternatively, an ad valorem i.e. a percentage of the price, tax may be charged for each unit sold or produced.

For complete notes and exam based question with model answers please contact Angie Hp 96790479 or Mr Ong 98639633

[adminMember]

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

Hi J1 H1 Economics Tuition Students

J1 H1 Economics for Academic Year 2013

Topic 2.1 How the Macroeconomy Works
Topic 2.2 Macroeconomic Aims, Problems/Issues, Consequences and Policies

Syllabus
• The Circular Flow of Income
• Sustained rate of economic growth
• Low inflation rate
• Full employment
• Favourable balance of payments

Outcome
• Explain the circular flow of income amongst households, firms, government and international economy.
• Explain the main macroeconomic aims, economic performance and living standards of a country.
• Explain the meaning of a sustained rate of economic growth, real and nominal GDP.GNP per capita, low inflation rate, full employment and favourable balance of payments.

Macroeconomics Lecture 1 : Introduction to Macroeconomics

1.1 What is Macroeconomics?

Macroeconomics is the study of the economy as a whole. The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously. Examples include unemployment, inflation, growth, trade and the gross domestic product.

Macroeconomics focuses on two basic issues.

Issue 1 : Long-run economic growth.

Issue 2 :Fluctuations in economic performance.

Because the economy as a whole is just a collection of many households and many firms interacting in many markets, microeconomics and macroeconomics are closely linked. The basic tools of supply and demand, for example, are as central to macroeconomic analysis as they are to microeconomic analysis.

! Stop and Think : How do macroeconomics issues affect you? Why should you be concerned?

For complete notes and exam based question with model answers please contact Angie Hp 96790479 or Mr Ong 98639633

[adminMember]

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

Hi J1 H2 Economics Tuition Students

J1 H2 Economics for Academic Year 2013

Microeconomics Topic 2.2 Government Intervention in the Market

H2 Syllabus :

• Government Failure

H2 Learning Outcome :

• Discuss how governments may create inefficiencies when they intervene in markets due to factors such as political objectives, administrative costs and lack of information.

1. What is Government Failure?

Government Failure refers to situations where inefficiency and inequity may have worsened following government intervention in markets designed to correct market failure.

2. Sources of Government Failure

(a) The pursuit of self-interest amongst politicians and civil servants rather than operating on behalf of citizens leads to a misallocation of resources. For example, politicians and bureaucrats may gain prestige from starting a new spending program even if the cost of the program exceeds its social benefit.

(b) Electoral pressures leading to inappropriate government spending and tax decisions. For example, decisions to continue with agriculture subsidies in countries which public finances can ill afford due to a big proportion of the electorate being farmers.

(c) Short-Termism which is a tendency to look for short term solutions to economic problems rather than making considered analysis of long term considerations. This could be more serious in democratic societies. The risk is that myopic decision-making will only provide short term relief to particular problems but does little to address structural problems. For example, instituting minimum wage legislation to allow workers to earn a decent level of living will often ignore the need to increase the productivity of such workers so that the market will reward them with higher real wages.

(d) Imperfect Information – Governments, like any economic agents, rarely possess complete information on which to base a decision. It is not surprising, then that governments may make the wrong policy response to a problem because they lack knowledge in costs, benefits, long term effects, behavioural changes etc. Governments needs information to answer these 3 questions, namely (i) What to intervene in? (ii) How to intervene? And (iii) By how much to intervene?

(e) Market Distortion – The free market mechanism is the best way of finding out (a) what consumer preferences are and (b) aggregating these preferences based on the number who are willing and able to pay for particular goods and services. Government intervention to correct one market failure may lead to the creation of far more serious market failure.

(f) Costs of administration and enforcement – Government intervention can prove costly to administer and enforce. The administrative costs of administering and enforcing a particular policy to correct market failure may outweigh the social benefits from the correction.

(g) Regulatory Capture – This happens when the industries under the control of a regulatory body can strongly influence the way they are being regulated to their own advantage. Examples of regulatory capture can be found in finance, telecommunication, utilities and environmental protection.

(h) Time Lags – It takes time for the government to identify the market failure, decide if intervention is required, formulate policies to address the identified market failure, and implement those policies. The political system also determines the time lags.

For complete notes and exam based question with model answers please contact Angie Hp 96790479 or Mr Ong 98639633

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