Economics Flashcards

In Singapore's A-Level Economics, what is the concept of 'scarcity'?

Answer: The fundamental economic problem that human wants are unlimited but resources are limited

Scarcity is the central economic problem — unlimited human wants versus limited productive resources. This creates the need for choice and opportunity cost, which is the foundation of economics.

What determines the price elasticity of demand for a good?

Answer: Availability of substitutes, proportion of income spent, necessity vs luxury, and time period

Price elasticity of demand depends on multiple factors: availability of close substitutes (more substitutes = more elastic), proportion of income, whether the good is a necessity or luxury, and the time period considered.

What is a 'market failure' in the context of Singapore economics?

Answer: When the free market fails to allocate resources efficiently, leading to a welfare loss

Market failure occurs when the price mechanism fails to achieve allocative efficiency. Examples include externalities, public goods, merit/demerit goods, and imperfect information.

How does Singapore's government use the Certificate of Entitlement (COE) system to manage car ownership?

Answer: By limiting the number of new vehicles through a quota system where COEs are bidded for

The COE system is a quota mechanism where the government controls the number of new vehicles by issuing a fixed number of COEs that must be bidded for. This manages road congestion in land-scarce Singapore.

What is 'comparative advantage' in international trade?

Answer: A country's ability to produce a good at a lower opportunity cost than another country

Comparative advantage means a country can produce a good at a lower opportunity cost relative to another country. Even if one country is better at producing everything (absolute advantage), trade based on comparative advantage benefits both.

What is the multiplier effect in Singapore's macroeconomic context?

Answer: An initial injection of spending leads to a more than proportionate increase in national income through successive rounds of spending

The multiplier effect occurs when an initial increase in spending (investment, government expenditure, exports) generates successive rounds of income and spending, magnifying the impact on GDP.