#6: Shopping in Singapore: An Economic Analysis

Singapore is a well-known shopping destination, but as the economy falters, tourist numbers plunge and the demand for goods and services falls, will Singapore’s status as a shopping paradise be jeopardized?

RazorTV- Singapore, still a shopping paradise?

In this video, Ms Lau Chuen Wei, Executive Director of Singapore Retailers Association expresses confidence in the ability of Singapore shops to continue providing “value” to shoppers. She also cites the upcoming Great Singapore Sale as an event shoppers will look forward to.

Besides the many discounts and promotions retailers dangle in front of shoppers (i.e. reducing prices), how else can they attract consumers and generate higher revenues?

The video also mentions about the opening of several new malls in Orchard. This will inject more competition into the retail industry and each player will have to contend with a “smaller slice of the pie”.

Do you think that on the whole, society (firms and consumers) would benefit from the opening of new malls? Why or why not?

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#5: The Asian Growth Model

In this post, we will focus on Asia’s stellar growth and the reasons behind Asia’s success.

http://www.economist.com/world/asia/displaystory.cfm?story_id=13356518

This article from economist.com highlights a common factor behind the successful growth of East Asian economies- dependence on exports as an engine of growth.  The economic growth of East Asian countries have been very impressive- Japan’s “economic miracle” after World War II, the growth of Asia’s four “tiger economies” (Singapore, Hong Kong, Taiwan and South Korea) and more recently, China’s double digit growth rates. Such results were achieved when these countries opened their economies and actively promoted trade. These countries have substantial export to GDP ratios (for instance, Singapore’s exports was 186% of GDP in 2007) hence suggesting that increase in GDP is largely “export-led”.

One of the many benefits of pursuing “export-led” growth includes the utilization of inherent comparative advantages in different countries. For example, China is endowed with abundant low cost labour, giving China an edge in light manufacturing sectors where labour costs can be kept low and the cost savings are passed down to consumers. Toys, textiles, furniture, electronics and a wide range of other products are “Made in China” and exported to the rest of the world.

However, overdependence on exports for growth may not be a good thing. Exports are very sensitive to changes in the external environment- good conditions will lead to a boom in exports, whereas a depression will cause a dive in exports due to the fall in external demand, very much like what is happening in the current economic crisis.  Since Asian economies are largely dependent on exports, a dramatic fall in exports will trigger off other chain effects, which will eventually hurt GDP growth. In particular, the greater the dependence on exports, the harder the economy will be hit.

But the economy may not be all that reliant on exports. This article suggests that Asian economies are not overly dependent on exports because they engage in export processing- where parts of the final product (intermediate goods) are imported and this might actually inflate the importance of exports.

So this begs the question- how important is trade to a country’s growth and what factors influence this? Is dependence on exports/trade for growth necessarily a bad thing? Do you agree with the article that “Asia needs a new model”?

Feel free to raise any point in the article too!

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#4: Thinking at the Margins

Recently a friend of mine asked me to explain the Marginal Principle. As some of you may already know, the Marginal Principle is one of the key principles of Economics. Basically, it provides individuals with a simple decision making rule- we should consider how a small change in one variable impacts us, and how by increasing or decreasing one unit of a particular variable, we can fine tune our decision making based on whether such an action will make us better or worse off.

So back to my friend, I decided to illustrate the Marginal Principle by giving him an example- Singapore’s food fad phenomenon- namely the fascination with donuts in 2007.

Back then, Singaporeans (including me!) would do anything to sink their teeth into donuts, like joining a long snaking queue and standing in the queue for many hours. However, as time went by and as I ate more and more donuts, the novelty begin to wear off and I was put off by the smell of donuts! And I suspect the same for most people as the queues outside donut shops shrank. I reasoned that marginal utility for a donut was initially very high- high enough to justify the marginal costs of getting a donut (e.g. cost of a donut and waiting time which could be better spent). But as one consumes a greater quantity of donuts, marginal benefit per donut falls below the marginal costs of gaining one donut and this no longer justifies consuming additional donuts.

Try describing a scenario, an example that uses the marginal principle! You will be surprised by how it is used to optimize decision making in our daily lives, or even government policies.

While you’re at it, perhaps you can explain why thinking at the margin is beneficial (as opposed to other policies) and the possible difficulties of incorporating marginal principle in decision making.

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Welcome to NEFMQ 2009 Blog!

Hello! Welcome to NEFMQ 2009 Blog!

We hope you have fun discussing economics and finance issues with your peers in this blog!

Do take some time to read the ABOUT and GROUND RULES sections before you get started. It contains REALLY IMPORTANT information about the structure of the blog, how to go about leaving your comments and how the comments will be graded.

Should you still have any lingering doubts or queries do post your questions in the Q&A section. We will try our best to clear up any uncertainties.

Cheers! =)

FYI: General Guidelines for Comments

Thank you for leaving your comments, the response has so far been rather encouraging! However, there has recently been some concerns regarding the length of blog commments, and we would like to address this here.

We appreciate the effort that you put into writing your comment post, but we hope to see less lengthy comments in the future. The purpose of this blog is to encourage discussion, and lengthy comments tend to deter others from reading and responding.

Moreover, it is not necessary to write an essay response to our blog posts, as our mark allocation is not designed to treat the blog comment as an essay. To put things into perspective, the breakdown of the Preliminary Round is as such:

4 Blog Comments (5% each, total: 20%)
80 MCQs (1% each, total: 80%)

In the future, please limit your comments to 2-3 paragraphs. We will reward posts that are clear and concise. Also, take note of past comments and avoid repeating the same points. We will give low marks to comments that merely repeat what has been said before. You can agree or disagree with other commentators, but please do so in a considerate manner.

Lastly, it’s okay if your post is a one liner, joke, or some random thought. As far as grading goes, we will only consider the marks of your team’s best four posts. Moreover, we chose to engage participants using a blog so that you can share your insights on economics and finance management in a more casual manner. Just do not offend anyone and strictly no vulgarities!

So have fun, and we look forward to seeing your comments =)

#3: “I need to be subsidized”

I am a big fan of Calvin and Hobbes comic strips. Perhaps comics are so popular because they have an uncanny way of relating to our daily lives with their hilarious commentaries on society and culture.

In this particular Calvin and Hobbes comic, Calvin tries to sell Susie lemonade at an exorbitant $15 a glass. Suzie of course refuses to pay so much for “lemon in some sludge water”. Calvin has no takers for his lemon juice and eventually asks for a subsidy from his mom.

Although this Calvin and Hobbes comic strip was printed almost 15 years ago, it has recently gained much attention. Some have drawn parallels between the comic and the current economic crisis, in particular, the economic stimulus packages that are dished out in an attempt to stem the downward spiral of economies.

Here’s an excerpt from an online writer that sum up such sentiments:

“Just like Calvin, the automobile industry and several financial institutions in the US have been pleading for bailouts after being affected by the subprime mortgage problem. The US government, in turn, has rushed to their side, claiming that not helping them might cause bigger economic problems and more companies to file for bankruptcy.

The public, however, is not really against bailouts per se. It just seems difficult for them to accept that these dole-outs are offered to industries and companies whose CEOs and executives enjoyed millions of dollars as salaries every year despite declining profitability …

Just like Susie in that Calvin and Hobbes comic strip, traders and investors “walked out” by unloading their stocks. That’s the reason why stocks fell today after the announcement of the bailout and economic stimulus plans”

The author argues that Calvin and ‘several financial institutions’ are similar in that they are crying for help in the absence of profits. Do you agree with the author that the ‘automobile industry’ and ‘several financial institutions’ are just like Calvin? Think about the ways in which they may be dissimilar: What would happen if Calvin’s mother did not give him subsidies? What do you think would be the effect if the government had not rushed to bail out financial institutions?

Feel free to talk about any other issues in the comic!

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#2: iLove iPod!

How many of you own an iPod? I’m sure many of us are proud owners of iPods, the portable media device that has become absolutely indispensable in our daily lives (well, at least for me!)

The Latest iPod Nanos (www.apple.com)

Since the release of the first generation iPods in 2001, iPods have become a global phenomenon, changing the music industry and constantly wowing consumers with their sleek designs and functions.

Despite the premium prices that Apple sets for iPods, consumers are still lapping up the stylish portable music player. Apple is one of the leading producers of mp3 players today and has managed to capture a substantial market share of the mp3 player industry. Why are consumers willing to forego cheaper alternatives for Apple iPods?

Here is an article that explains some reasons behind iPod’s success.(http://www.besttechie.net/2008/03/01/the-ipod-success-thank-the-marketing-department/) The writer argues that iPods are largely successful because of a marketing strategy that associated iPods as “cool” and a must have fashion accessory. Such measures have influenced consumer preferences and largely generated favourable demand for iPods. One of the marketing strategies included iPod advertisements that showed “a bunch of people dancing on a colored background.” And in case you have not seen such an ad…

There are many strategies Apple employ to make iPods a phenomenal success. Out of all these strategies, which do you think is the most important?  (You may refer to the article or your own knowledge!)

Apple has also enjoyed much success in many other sectors.  Not only has Apple managed to revive interest in its Mac computers, Apple’s forays into other areas such as the music and movie industry (iTunes) and smart phone industry (iPhones) are phenomenally successful. Do you think Apple has employed similar strategies in these areas?

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#1: Recession? What Recession?

Unemployment, manufacturing output down, GDP growth revised downward, fall in stock markets… The list of bad economic news never ends, or so it seems.

There are some bright spots amidst the financial gloom of retrenchments and closures. Take the fast food industry as described in this article (The Straits Times- Fast Food Chains are expanding). Despite the economic downturn, fast food restaurants in Singapore are actually expanding and hiring more workers!

The article claims that “the success these restaurants are enjoying comes from their affordable well-loved meals, served up in pleasant settings”. Do you agree with the reasons listed? Is it possible to explain why the fast food industry is able to do well in spite of harsh economic conditions using greater economic analysis/ reasoning?

Given that the fast food industry is able to enjoy good business during times of recession, it seems like the fast food industry is “recession proof”. Are there any other industries that display such characteristics of being “recession proof”?

The article also mentions that customers who especially enjoy fast food are children and students. What strategies do you think fast food companies have implemented to woo such customers and do you think the success of fast food restaurants largely hinge on these target groups/ strategies?

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FYI: The Crisis of Credit Visualized

The financial crisis we face today was triggered by the sub-prime credit crisis in the US.

Learn more about the sub-prime crisis and how it all began. The two youtube videos, created by Jonathan Jarvis of crisisofcredit.com, seek to give a clearer picture of the credit crisis and clarify certain terms.

The Crisis of Credit Visualized – Part 1

The Crisis of Credit Visualized – Part 2

Note: This is a FYI post, so comments for this post will not be graded but feel free to comment anyway!