Economics Real World Examples G11 Internals

Subsidy

Chinese Electric Vehicle makers got $313 Billion from 2009 - 2023 making it more competitive

Includes government funding for infrastructure, R n D programs and sales tax exemptions

Electric Vehicles produce lower lifecycle emissions by 70%

Price Floor

Australia introduced a minimum wage on July 1 2024 to reduce poverty and income inequality.

Wage: $24.10 / hour

Price Ceiling

UK introduced price ceiling on energy bills

Due to the restricted supply chain from Russia-Ukraine war

Time Jan - March 2024

Price Change $4000 -> $1700 per year

Indirect Tax

UK introduced a indirect tax on sugary drinks on April 2018

18 pent tax on drinks with at least 5g of sugar per 100 ml.

Goal is to reduce obesity rates

Sugary drinks tax prevented over 5,000 cases of obesity in young girls

Negative Externalities of Consumption

Singapore government increased their tax on liquor in 2014

25% increase in liquor tax

reduces demand for alcohol (consider PED)

Negative Externalities of Production

UK introduced a indirect tax on sugary drinks on April 2018

18 pent tax on drinks with at least 5g of sugar per 100 ml.

Goal is to reduce obesity rates

Positive Externalities of Consumption

Australia 2016, "No Jab, No Pay"

AUS$30,000 fine on childcare/education centres admitting unvaccinated child

Positive Externalities of Production

Chinese Electric Vehicle makers got $313 Billion from 2009 - 2023 (re use subsidy) which reduces greenhouse gas emissions

Includes government funding for infrastructure, R n D programs and sales tax exemptions

Merit good

Electric Vehicles produce lower lifecycle emissions by 70%

Demerit good

Sugary drinks tax prevented over 5,000 cases of obesity in young girls

Total ban

1987 Montreal Protocol

Complete ban on CFCs, was successful in reducing emission of CFCs

International Compliance

1997 Kyoto Protocol

Agreement to cut global emissions of greenhouse gasses by 65%. Covers 172 countries.

Not incredibly successful

Tradable Permits

2005 EU Emissions Trading Scheme (EU ETS)

Cap and trade program imposed on the EU

So far it has reduced emissions by 47%

Cross Border Externalities

2015 Haze from Neighbouring countries cost Singapore $1 Billion in damages

Moral Hazard

2008 Financial Crisis originating in the US

Banks engaged in risky lending assuming that the government would rescue them if they collapsed e.g Goldman Sachs

However when they did the government did not save some of the banks e.g Lehman Brothers

Adverse Selection

Overcharging for health insurance

2010 Affordable Care Act in the US which provided insurance for everyone (opportunity cost for government)

Perfect Competition

Unrealistic but closest would be agricultural markets

Monopoly

Search Engine Market - Google with 90% Global Market Share

Benefits from huge economies of scale

Formal Collusion

OPEC is a cartel consisting of 12 of the worlds major oil exporting nations

Business Objectives

Patagonia: Social Responsibility

Adopted a multitude of sustainability schemes that created customer loyalty

Government response to abuse of market power (or anti-competitive behavior)

Competition and Consumer Commission of Singapore (CCCS) takes 10% of business profit for the next 3 years and can issue directions to stop activity.

Choice architecture and nudges

2023 Singapore Nutri-grade

A mandatory front of pack labelling initiative that rates it's "healthiness" using sugar and fat levels

Reduced median sugar content in drinks by 3%

Consumption of drinks labelled A - B has increased by 30%