Economics Real-Life Examples

Flashcards covering real-life economic examples.

Price Elastic Demand

Demand for rides became price-elastic in NYC during COVID-19 recovery (2021-2022) as Uber/Lyft increased prices by 40-50% due to driver shortages, leading to a 25% drop in demand as customers switched to alternatives like public transportation.

Uber and Lyft offered financial incentives ranging from $200 to $1,000 per driver to attract new and returning drivers to the platform, resulting in an increase of 30% in active drivers by the end of 2021 

Price Inelastic Demand

The average list price of insulin nearly tripled from $290 in 2014 to over $500 per vial in 2023. (70% inc.) 

 

Despite these significant price hikes, the quantity demanded remained relatively unchanged because  

The number of insulin users in the U.S. remained consistent, with an estimated 7.4 million people needing insulin to manage their diabetes yearly. 

Income Elastic Demand

The luxury car market in China exhibited income elastic demand between 2014 and 2019, growing by 14% annually as per capita income rose from $7,400 to $10,200. This resulted in higher prices and longer waiting times due to price inelastic supply, affecting households and firms differently.

Income Inelastic Demand

Rice, being a necessity and staple food in India, has low-income elasticity. Income per capita: $1,300 (2015) – $1,900 (2020) 

 

BUT per capita rice consumption: 102.5 kg in 2015 to 103.5 kg in 2020. 

Price Elastic Supply

US Shale Oil on Price Crash (2014-2019) 

 

2014 $115 per barrel to around $50 per barrel by early 2015 

Increase output due to technological advancements in hydraulic fracturing (fracking) and horizontal drilling

oil production surged from 8.7 million barrels per day in 2014 to 12.3 million barrels per day in 2019 increase of 41%, making the U.S. the world’s largest oil producer.  

Price Inelastic Supply

The US Housing Market is price inelastic. Median home prices increased from $320,000 in 2020 to $400,000 in 2022, but construction time increased from 6 to 9 months due to supply chain and labor shortages. Zoning laws and land-use regulations also restrict land available for new developments.

Subsidies

Germany Renewable energy subsidies 2020 (Environment-equity trade off) 

Renewable Energy sources act (EEG) subsidize 25.6 billion  
45.8% of gross electricity consumption 

CO2 emissions: 221 mil tones down from 312 in 2010 

BUT... 
 
Avg household 0.316/kWh (highest in EU, almost double average) Regressive !! 
 
EEG surcharge 20% of total bill 
Strain on industrials company to relocate -> potential job losses 

Indirect Tax & Negative Externalities

An increase of VND15,000 tax per cigarette package in Vietnam is expected to reduce smokers by 696,000 by 2030 compared with 2020 and add VND29.3 trillion per annum to the state budget.

Price Mechanism

In 2024, Oasis dynamic pricing employed by Ticketmaster surged from 148.5 pounds to 355.2 pounds 
 
Signaling: Raise prices as demand exceed supply (shortage) 
Incentizing: Higher price incentive sellers to supply more tickets for laregr venue or more shows 
Rationing: allocate tickets to consumer who values them most highly -> efficient 
 
BUT can lead to backlash as it trades equity vs efficiency  
 

Price Floor

Russia set a minimum price of wheat export at $250 per metric ton in Oct 2024 to curb domestic inflation and ensure adequate income to farmers.

Price Ceilings

Early 2021, gov imposed price ceilings on pork and chicken in Metro Manila to combat food inflation. Prok capped at 270-300 pesos per kg down from over 400 pesos/ 
 
BUT it can lead to shortages as suppliers may find production unprofitable and reduce supply. Gov might have to increase imports to address potential shortages. 

Tradable Permits

The EU Emission Trading System (ETS) since 2005 aims to reduce greenhouse gas emissions by 2030. In 2023 EU ETS has helped bring down emissions from European power and industry plants by approximately 47%, compared to 2005 levels.

Carbon Tax

British Columbia, Canada, introduced a carbon tax in 2008 at CAD$10 per ton. From 2008-2015 BC carbon emission dropped 4.7% with a 17% economic growth rate.

Positive Externalities

National Health Services offer 25 million flu jabs winter of 2019. Vaccine given to all primary aged students additional 600,000 people vaccinated 
 
In a free market, firms and individuals will base their decisions on private costs and benefits. UK residents will under-consume flu jabs without government provision, giving rise to a market failure. 
 

people who did not get the flu jab would have a lower risk of getting flu-related illnesses. Overall, this 

benefits the society through a healthier population and more productive workforce.
 

GDP Hidden economy

Norway underestimated by 18.7% while US is 8.6% as of (1999-2007)

High tax burden higher hidden econ
Inaccurate to compare values of GDP, as many economic activities go unreported and are not taxed, affecting GDP calculations.

Supply side policy - corporation tax cut

China

Expansionary Fiscal Policy

American recovery & reinvestment act (2009)

Ended the Great Recession in July 2009, obamab’s plan to put $787 billion into the pocket of American families & small businesses to boost demand & instill confidence