EAns Promo

1. Tax rebate = subsidy 

2. ANY AE 

• Overproduction 

• Initial and final WL 

In each case, explain how the above events would have affected consumer expenditure 

• In each case = 2 diagrams (one for DD, one for SS factor) NOT the combined one 

• DOUBLE MAP (MUST have keywords = shortage, pressure, price increase, new eq as argued above) 

Affordability = reduce price of goods (methods and eval?)

• Transfer payments/vouchers = NOT allowed 

• Eval: Depends on how severe the rise in price is + how urgent the issue is + government economic priorities

Consumer ignorance (Give EXAMPLE on what ignorance) (Eg. oral health)

For example, oral health checks would allow individuals to detect and treat oral illnesses earlier and save on healthcare costs in the future. However, since potential savings in oral healthcare are in the future, they are uncertain and difficult to estimate accurately -> individuals underestimate true MPB 

Free provision (100% subsidy) + graph

• MPC will fall and shift to MPC1 where it coincides with the MPB at P = 0 

• Where P = 0,  output will increase from Q to Qf 

• New overconsumption 

• Assuming Qf closer to Q* than Q, new welfare loss less than original

Antithesis: why SG may not adopt Thailand’s approach 

• Opportunity cost 

• High fiscal cost 

  • Strain on government budget -> raise taxes -> impacts efficiency, households 

  • Measure not sustainable in long term 

Missing: Explain market structure 

• Internal EOS -> lower unit cost and create a high MES -> potential entrants with small market shares and a lower scale of production cannot match cost efficiencies -> difficult to compete -> increase BOE -> few dominant firms 

Extent to which consolidation of firms is beneficial for consumers and society

• Label AC + AC can only intersect MC ONCE 

(BENEFICIAL eg. + EVAL)

• Example: Large capital expenditures on infrastructure such as cables and technology can be spread over a larger output -> lower unit cost 

• Eval: Lower prices and increase CS assumes that firms pass on their lower costs to consumers. But if they retain their cost savings as higher profits, then the above benefits will not be achieved. Firms may also decide to re-invest profits into innovation -> if it improves the welfare of consumers, it could still be beneficial in the long run for consumers

Extent to which consolidation of firms is beneficial for consumers and society

• Label AC + AC can only intersect MC ONCE 

(NOT BENEFICIAL)

• Consumers: lower CS, fewer choices and worsened inequity (ALL 3) 

• Larger supernormal profits will exacerbate inequity -> as the gains go to shareholders of the firm while consumers bear the burden of higher prices 

• Fewer firms -> produce variety and consumer choice worsen as remaining firms may not provide the full range of services desired

Whether firms have high market power 

• High VS low market power

Consolidation of firms 

• Before VS after