1 - Microeconomics

Supply shift right India subsidizing gas

Supply of air travel increasing in the UK as more airline
companies are joining

Supply shift left Sugary drinks - UK sugar tax shifts supply curve to the left

Supply shock - supply May 2018 - Supply of vanilla ice cream shift to left - Price of
shift to the left vanilla rose to $600 per kilogram because of cyclone in
Madagascar which damaged a lot of the plantations

Excess demand Iraq invasion 2003, oil prices rose $20 to $35 a barrel in 2004,
(shortage) the war disrupted extraction of crude oil, reducing world supply

Excess supply Harvest season for crops, there is more supply than people
will be willing to buy, price decreases

High PED (elastic) goods Luxury items - Gucci clothing

Low PED (inelastic) Cigarettes have a PED between -0.4 in USA

goods (2 examples)
- The price of Daraprim (cancer drug) was increased by
more than 50 times but demand barely changed,
because it was a necessity

Positive XED Low XED (weak substitutes): tea and coffee

(substitutes) High XED (strong substitutes): XED of Coke and pepsi has
been estimated to be about + 0.7

Negative XED Low magnitude XED (weak complements): tea and milk
(complements) High magnitude XED (strong complements): smartphones and
mobile apps, LV and BMW luggage

Negative YED Second-hand clothing, house-brand goods, margarine, cheap

(inferior goods) goods

Low positive YED Most foods consumed at home have a low YED - about 0.2
(income inelastic)
(normal good)

High positive YED Premium cars, boats, jewelry

(income elastic)
(luxury good)

High PES (elastic) Taxi services, pens, smartphones

Low PES (inelastic) Nuclear reactors, fresh produce, gold, housing

Indirect tax Singapore GST: 7% on all goods and services

Subsidy US agricultural subsidies: $20 billion per year
Ensures steady domestic food supply, provides economic
stability to farmers, increases international competitiveness

China subsidising solar panel production, increased production

by 25%

US cotton producers subsidies

Price ceiling India price ceiling on bare metal stents, implemented Feb
2017
Prior to cap, bare metal stents were selling for 650 USD, now
capped at 100 USD

Rent in San Francisco

Price floor UK price floor on carbon, implemented April 2013

Part of the EU Emissions Trading System aimed to combat
climate change, the current price floor is 18 pounds per tonne
of CO2 (Year 2019). Promotes investment in low-carbon
electricity generation

Minimum wage in UK is 8 pounds an hour

Legislation for positive Vaccinations in Australia - making it mandatory for children to

externalities of get vaccine to enroll in school - done through legislation
consumption/merit goods

Direct provision of merit New Zealand national immunisation schedule, free vaccines
goods offered to reduce diseases and illness

Subsidized provision of SG - Low-income Families are eligible to sign their children up

merit goods to tackle for the Financial Assistance Scheme (FAS). Under the FAS,
underconsumption of students get to enjoy subsidised school fees and
merit goods transportation fees, and free textbooks. This increases the
affordability of education in Singapore, effectively tackling the
underconsumption of pre-tertiary education in Singapore that
is caused by high income inequality.

Negative externalities of Malaysia -

consumption -cigarettes Nov 2015, 40% excise duty placed on cigarettes
Legislation Jan 2019, smoking banned in all eateries
(3)
Singapore raised age from 18 to 19

UK - Smoking cost to NHS of about 3-6 billion pounds a year

Sugar tax 2017 - about 20p per litre on sugary drinks in the UK, it has
worked as many companies have changed their recipes to
 reduce sugar content in their drinks

Mexico sugar tax cut sales by 12% in the first year of

implementation

Positive externalities of Production of hybrid car technology by Toyota, as they are

production providing free access to their patents and providing parts to
competitors, to increase the use of lower-emission technology

Tesla also offering free access to electric vehicle patents

Negative externalities of DuPont released harmful chemicals up until 2013 into the Ohio
production (2 examples) river, known to cause cancer. Currently facing lawsuit from the
state of Ohio

16 of the top 20 most cities with worst air pollution are from
China - due to factories, industrialization, surge in no. of motor
vehicles
China subsidized $9800 to buyers of electric and hydrogen
vehicles to combat rising air pollution

Advertising to promote 5-a-day programme run in Germany in line with WHO

consumption of merit statement to eat 400 grams of fruits and vegetables per day
goods

Common Access Coral harvesting in the Great Barrier Reef, government quota
Resources (2 examples) set at 200 tonnes but it is not sustainable

Overfishing in Virginia for striped bass, currently in discussion

to ban recreational fishing. During the fishing season, a quota
of 1 fish per day is already in place.

Public goods National defense, street lighting, roads, public parks, sewer
systems, law enforcement

Legislation to combat Singapore air pollution laws, vehicles must meet strict
negative externalities of emission standards to be able to be used
consumption

Carbon tax In 2012, Japan implemented tax on all CO2 emissions from
fossil fuels at a rate of 289 yen per tonne of CO2. All tax
revenue used for reducing CO2 emissions, investing in clean
tech

Last month, Canada imposed a carbon tax of $20 per tonne of

carbon emissions

Cap and trade schemes EU Emissions Trading System: since 2005, EU set cap on
total amount of greenhouse gas emissions, can be traded and
sold, total cap is reduced over time to reduce total emissions
Funding for clean PUB, Singapore’s national water agency funded and produced
technology NEWater, which is recycled water, treating used water

In 2013, Windcentrale, a Dutch company, crowdfunded $1.3

million to invest in wind turbines to place in the centre of the
Netherlands
2 - Macroeconomics

GDP vs GNP stats Developing countries have lower GNP than GDP, as much of
their GDP is contributed by multinational corporations

Bangladesh GDP 2017: 250 billion USD

Bangladesh GNP 2017: 120 billion USD

Half of Bangladesh’s GDP is from foreign firms owing

productive capacity in Bangladesh. This income is likely not
spent in the country, so does not affect economic growth

Total GDP/GNI vs India GDP: 2.6 trillion USD

GDP/GNI per capita France GDP: 2.6 trillion USD

India GDP per capita: 2,000 USD

France GDP per capita: 38,000 USD

Green GDP China measured Green GDP for one year, 2004.
China GDP 2004: 1.9 trillion USD
Environmental loss 2004: $66 billion, or 3% of GDP

Was considered to be too conservative, as it only took into

account the costs of environmental pollution. Did not take into
account costs of natural resource depletion, soil
contamination, ecological damage

China may have stopped measuring green GDP as it could

have been politically damaging.
460,000 died prematurely from air and water pollution each
year.
Announced in 2015 that they will reintroduce green GDP to
"holistically reflect" the environmental cost of economic activity

High and low Spain: 14% unemployment (high job protection)

unemployment Singapore: 2% unemployment (no minimum wage)

Frictional unemployment Singapore has been restructuring the economy, shifting

towards a digital economy aiming to incorporate technology to
increase productivity. One reason for this is slow workforce
growth and short supply of domestic workers.

As the economy restructures, new jobs are created and some

jobs are abolished, which results in frictional unemployment as
people change jobs.

Structural unemployment During Singapore’s economic restructuring, MOM said “jobs

and skills mismatches will continue to be a challenge”.
SkillsFuture is a government program aimed at reskilling the
workforce through training to gain skills that are in demand.
 Citizens are provided with credit that can only be used to go to
a training programme.

Seasonal unemployment Liberia: agriculture employs 70% of the population

This would result in high seasonal unemployment, as most of

the workforce is only required during peak periods, the
harvesting and planting of crop support

Cyclical unemployment 2008 financial crisis sent many economies into recession,
which increased cyclical unemployment
In the US, before the financial crisis in Dec 2007,
unemployment was 5%. At the end of the financial crisis in
2009, unemployment was 9.5%.

High inflation Argentina: 50%

Central bank increasing money supply by printing money to
finance the government budget deficit, which creates inflation.
The depreciation of the peso has worsened inflation, as
imports become more expensive, domestic demand increases
and firms have less incentive to cut costs

Target inflation Singapore, US, China - 2%

Deflation Japan has been experiencing periods of deflation since the

late 1990s, due to the declining, aging population, strict
immigration laws, and declining productivity growth. Japan is
utilising negative interest rates to make money available for
cheaper, buying back bonds to increase money supply in the
economy, and introducing new visas to allow blue-collar
workers to emigrate to Japan

High economic growth India, referred to as the world's fastest growing major
economy, around 7%. Growing population, privatisation of oil,
coal and airline, tax reform, all helped increase growth.

Low economic growth (2 Jamaica, 1.8% GDP growth rate. Heavy debt from the failure
examples) of state owned enterprises in the past, worsened by the
financial crisis, led to high unemployment, currently around
9%, and slow economic growth.

Eurozone growth is slowing. 1.9% growth in 2018, but only

0.2% growth from Q3 to Q4 of 2018. Projected growth for 2019
reduced to 1.3%. Reason: Italy entered recession, France low
growth, trade tensions between US China and Europe,
uncertainty over Brexit.

Equal distribution of Norway Gini Coefficient: 0.23

income Public education, including university, is free so everyone has
an equal opportunity to earn a high income. Progressive taxes,
long term unemployment benefits help redistribute income.
Unequal distribution of South Africa Gini Coefficient: 0.63
income Over half of population in poverty
Income distribution is worsening, not enough new jobs are
being created, and the jobs that are being created are
high-skill jobs, not accessible to those in poverty.
Effects of apartheid have also left many in a poverty trap, with
no education and no low-skill job opportunities.

Expansionary fiscal Barack Obama’s economic stimulus package, ended the

policy recession following the 2008 financial crisis. Cut taxes by $290
billion, spent $220 billion in unemployment benefits, allocated
$275 billion to federal contracts to create jobs. Helped build
consumer confidence after the recession and reduce
unemployment

830

Contractionary fiscal Suggested by the IMF to Argentina when they made a deal in
policy 2018. Higher taxes would allow Argentina to finance some of
its debt, and lower government spending prevents worsening
the debt

In the 90s, Bill Clinton raised income taxes from 28% to 36%
for high income earners. Corporate tax also increased from
34% to 36% for corporations. Inflation fell from 6% to 3%.
However, unemployment increased

Expansionary monetary Jamaica is employing expansionary monetary policy by

policy reducing interest rates, currently slashed to 1.25%, in order to
stimulate economic growth.

European central bank employed long-term expansionary

monetary policy to stimulate economic growth, utilizing 0% and
negative interest rates of -0.4% to encourage spending, but
still not effective.

Contractionary monetary In mid 2018, the inflation in India was rising, nearing 5%.
policy Contractionary monetary policy was used, increasing interest
rates to 6.25% to curb spending and reduce inflationary
pressure.

Argentina used 40% interest rates to try to control inflation and

try to control a dive in the peso

Investment in human Singapore, developing a strong public education system.

capital
SkillsFuture is a government program aimed at reskilling the
workforce through training to gain skills that are in demand.
Citizens are provided with credit that can only be used to go to
a training programme.
Investment in technology Singapore committed to invest 1% of GDP into R&D, Fintech,
AI, digital healthcare

Investment in Indonesia infrastructure investment 2017: $28 billion to build

infrastructure 30km bridge linking 2 islands
Reduces transportation costs - reduces costs of production

Industrial policies Tax Cuts and Jobs Act, implemented by Trump in Dec 2017
Reduced corporate tax from 35 to 21%, resulted in increased
investment to expand productive capacity

Deregulation Singapore removed regulations on the electricity market,

allowing private firms to sell electricity from Nov 2018, which
increases competition
Previously, only government owned SP Group was able to sell
electricity

Privatisation India privatised the coal and oil industry, removing the
monopoly power of the state and allowing private firms to join.
This encourages domestic investment and FDI

Trade liberalisation USMCA - US Mexico and Canada Agreement, signed in Nov

2018, allows select products to be traded tariff-free between
the three countries, e.g. automobiles, dairy, intellectual
property

Made to replace NAFTA, with a few changes. Not yet ratified.

Anti monopoly regulation Singapore Grab and Uber

Competition and Consumer Commission Singapore fined Grab
and Uber $13 million for merging in SEA, as it reduced
competition in the market
Grab was required to maintain the pricing algorithm it had
pre-merger

Reducing unemployment US congress decided not to extend federal unemployment

benefits and minimum benefits at the end of 2013, which means unemployment
wage benefits would end for 1.3 million people. This forced them to
find a job, even if it was low paying.

Reducing labour union UK reducing trade union power, 2015, following a large
power number of strikes by London Underground and railways

Increased punishment for unlawful strikes

Introduced ability to fine the union for breaches of rules up to
20k pounds

Income and business tax Tax Cuts and Jobs Act, implemented by Trump in Dec 2017
cuts Reduced corporate tax from 35 to 21%, resulted in increased
investment to expand productive capacity, and reduced
income taxes
Automatic stabilizers In 2008 US spent $220 billion in unemployment benefits in
order to stabilize the economy during recession