Economics Examples

Supply and Demand

Supply shocks

• 2017 Qatar diplomatic crisis when countries in Middle East like Saudi Arabia and UAE cut off ties with Qatar caused oil supply shock and oil prices to rise by 1.6%
• May affect UCOP in Singapore, as 5.5% of Singapore's total oil imports come from Qatar
• However, Singapore has diversified sources eg 11.3% from Saudi Arabia, 10.9% from UAE

Market Failure

Negative externalities

• UK tax on sweet drinks (2017)
• Combat diabetes, obesity and tooth decay 
• Expected to raise $1b in tax revenue

Macroeconomics

Fiscal policy

• South Korea launched a US$10b fiscal stimulus package in 2017
• 7 trillion won on welfare for elderly, working mothers and low-income households
• Create 110,000 jobs

Supply side policies

• Japan's Society 5.0 drive increases innovation in areas like AI

International Economics

Comparative advantage

• Singapore high-end goods and services
• eg medical tourism: cutting edge technology, medical expertise
• $1.1b in 2012
• However, losing out to low-cost competitors eg Bangkok, Malaysia 
• Nevertheless, Singapore differentiates itself and enhances its non-price competitiveness by providing premium service 
• eg Farrer Park Hospital offers patients shopping and delivery service via wireless tablets, and serves food from the adjoining One Farrer Hotel and Spa

Trade and investment policies

• China's Belt and Road Initiative (BRI)
• China's Regional Comprehensive Economic Partnership (RCEP)
• Singapore signed a MOU with the Myanmar Investment Commission (MIC) in 2017 to make it easier for Singapore firms to invest and expand in Myanmar.
• eg Singaporean firm BreadTalk partnered with Myanmar conglomerate Shwe Taung and opened its first outlet in Yangon in 2017
• eg Singaporean firm Bok Seng Logistics partnered with Myanmar conglomerate Ayeyar Hinthar to provide logistics at Pathein Industrial City in Myanmar in 2017

Advantages of globalisation

• FDI
• eg Japanese electronics firm Minebea set up a facility in Cambodia in 2012, hiring 20,000 Cambodian workers, who received training and knowledge transfer to do more value-added processes like making precision parts for smartphones, rather than low-value added processes like packaging and assembly. This allows Cambodia to move up the value chain from manufacturing low-cost garments to more advanced electronics.

Disadvantages of globalisation

• Brain drain
• eg Taiwan suffers from highest talent deficit of -1.4, as locals migrate to Mainland China, Singapore etc
• eg in the EU, people migrate from less economically-prosperous regions like Greece, Spain, Portugal, Romania and Bulgaria, to more economically-prosperous regions like Germany

Firms and Decisions

Economies of scale

• Tunglok invested in high-tech machinery to improve productivity. In 2013, it installed 3 automated woks called Artificial Intelligence Cooking (AIC) machines in its central kitchen, which can cook 3x faster than human chefs, and reduce energy consumption by up to 30%. 

Product differentiation

eg telco industry
Starhub launched DataShare plan that allows users to share 3G data (2017)

Oligopoly mutual interdependence

• eg following Singtel's MobileShare Supplementary Plan, Starhub launched its DataShare Plan in 2017
• eg following Grab's GrabFamily service that offers Grab-and-Go seats for children, Uber launched its Uber Car Seat service in 2017

Infant milk formula in Singapore

• Oligopoly by 6 brands 
• High prices (more than doubled over past nine years)
• Extensive non-price competition eg advertising, R&D 
• eg premium formulas with special ingredients (eg DHA)
• eg hospital sponsorships and milk rotation programmes
• Total marketing expenditure increased by 42% from 2010 to 2014
• Imperfect information eg mothers unaware that formula milk can be stopped after child turns one year old, perceive that more expensive formulas are of higher quality
• Introduce more competition eg Australia's Own Food, Singapore brand Einmilk
• Government intervention 
• eg CCS launched a task force to oversee and regulate prices of infant milk formula
• eg HPB launched public education campaign such as providing nutritional information of milk formula, weaning at supermarkets
• eg $1.5m scheme that provides milk formula vouchers for low-income families launched in 2017 will benefit 7500 children

Mergers and acquisitions

eg container shipping industry

• Hamburg Sud was acquired by Maersk Line, the world's biggest shipping firm, to hold 18% of global market share (2017)
• China Ocean Shipping Group and China Shipping Group merged to form China Cosco Shipping Corp. , helping them to increase market share to 8% (2015)
• Japan's "Big Three" shipping giants Kawasaki Kisen Kaisha, Mitsui OSK Lines and Nippon Yusen Kabushiki Kaisha set up a joint venture named Ocean Venture Express, helping them to increase market share to 7% (2017)

Government intervention

• EU fined Google $2.7b for antitrust practices in 2017 

Singapore Statistics

• Unemployment 2% in 2017
• Inflation 1.1% in 2017
• Imports 149.6% of GDP in 2015
• Exports 176.5% of GDP in 2015
• Trade 326.1% of GDP in 2015
• Main trading partners
• Export to
• China (12.6%)
• Malaysia (12%)
• HK (11%)
• Indonesia (9.4%)
• US (5.9%)
• Import from
• China (12.1%)
• Malaysia (10.7%)
• US (10.3%)
• South Korea (5.9%)
• Japan (5.5%)
• Main exports
• Electronic integrated circuits (20.5%)
• Petroleum oil (16.1%)
• Data processing machines (2.5%)
• Semi-conductors (1.9%)
• FDI was 334.2% of GDP in 2015
• Bilateral Investment Treaties (BITs) with 46 countries
• Maximum 17% corporate tax
• Maximum 20% income tax