Ban now covers Tokyo imports

Source: #PACOM / flickr

“Cabbage from Kanagawa and leek from Tokyo…imported by Singapore over the last two days, were found to contain radioactive contaminants, said the Agri-food & Veterinary Authority (AVA).

As a result, a suspension on importing fruits and vegetables has been extended to the entire Kanto region…part of a slew of measures…amid growing food safety concerns, two weeks after the Fukushima nuclear power plant was hit by a massive magnitude-9 earthquake and then a tsunami.

Since last Friday, all consignments of fruits, vegetables, seafood, meat, milk and milk products imported from Japan have been subjected to a ‘hold-and-test’ process…products will be released for sale only after test results show no signs of contamination.

To date, import of milk, milk products, seafood and meat from parts of the Kanto region, as well as Fukushima prefecture, has also been disallowed.  No fruits and vegetables from Ehime are allowed in either…

Japanese restaurants The Sunday Times spoke to said business had gone down by as much as 30 per cent, and it might get worse with the latest ill tidings…

The manager of Fukuichi Japanese Dining, Ms Lynn Tiu, 44, said the outlet no longer gets its greens from Japan.  ’Instead… from Malaysia or local suppliers…fish, our supplier gets it from many places around the region…no longer import from any places in Japan.’

Chef-owner of Nagomi Restaurant Satoru Nada said he had been getting more phone calls from anxious customers. But despite assurances, business has dropped by a third.

Still, the bad news has not deterred customers like Mr Adrian Tan, 39. The project supervisor said he would continue to patronise his favourite Japanese eateries. ‘Because if they fold after this, where will I get my Japanese food fix?’

…Jimmy Lim, 28, said he had stopped going to Japanese eateries altogether. He used to visit them at least twice a week.

‘I know it’s safe but, still, you can never be sure. I’ve even stopped buying Japanese products from the supermarkets,’ he said…’”

Source: Straits Times, 27 March 2011

Questions:

1. Due to the earthquake, and resultant tsunami and nuclear crisis, explain how you would expect the market in Singapore for Japanese food items to be affected.
2. Due to the earthquake, and resultant tsunami and nuclear crisis, explain how you would expect the market in Singapore for Japanese cuisine to be affected.

   (Revisit these questions after you learn more about the concept of elasticity of demand and supply.  Also consider factors that are outside the scope of this extract if possible.)

FYI: Healthcare we can all afford

Source: xcode / flickr

Please refer to the MOH pamphlet here: http://www.moh.gov.sg/mohcorp/uploadedFiles/Means-Testing/MT%20pamphlet%20(English).pdf

Ponder

1. What are the measures taken by Singapore’s government?
2. Why are they necessary?
3. Explain and evaluate the measures taken.

Field Events

Source: Scott Butner / flickr

“…the harvest season in the northern hemisphere is being marked by turmoil on global wheat markets.

A big reason is to be found in one of the world’s largest wheat exporters, Russia. Hit by fires and drought which have wiped out a third of the grain crop, the authorities there have banned exports…until next year’s harvest. As a result, wheat prices…have nearly doubled since the low point in June of $4.26 a bushel. That has prompted global jitters…

The crisis two years ago, by contrast, was the result of a more worrying structural shift: a slow build up of demand in developing countries where rising living standards fed the desire for more meat-based meals. This added to demand for cereals (a kilo of poultry requires about two kilos of grain, a kilo of beef much more). The result was a rise in prices over a much longer time and in many other commodities such as rice too. This year has brought a sudden spike, mainly in wheat. Prices now are still more than 40% below those record highs…

Closer scrutiny reveals a sunnier picture in other respects too. Supplies are strong. The FAO estimates world wheat production this year at 646m tonnes, 5% down on 2009’s bumper crop but still the third-highest on record, thanks to excellent harvests in America and Canada. Australia is also set for a weighty crop, having successfully dealt with a threatened plague of locusts. Last year’s bonanza replenished stocks, which stood at a seven-year high at the beginning of the year. By 2011 these inventories will be run down to around 181m tonnes but this is still a lot more than the 144m tonnes of wheat stocks at the height of the food crisis.

Maximo Torero of the International Food Policy Research Institute, a think-tank, says that even with export bans in Ukraine and Kazakhstan…supplies are still ample. And farmers should respond to the high prices by planting more wheat for next year…

Admittedly, some stabilising factors from past decades have eroded. Increasing demand from developing countries has tightened the market, making disruptions such as Russia’s export ban more noticeable…

If volatility increases, it may prove a problem for farmers who have confusing signals about what crops to plant for the next year’s harvest. Climate change, with its promise of droughts and floods, also adds uncertainty. Recent floods in Pakistan, the world’s eighth-largest wheat producer, arrived after this year’s harvest but the damage wrought by the waters may yet affect next year’s crop…”

Source: “Field Events,” The Economist, 9 Sep 2010

Ponder

1. What are the determinants of the global supply of wheat, as mentioned in the article?
2. With the aid of a diagram, explain the likely impact of the demand and supply changes seen or to be seen between 2007 and 2011 on wheat.

28% of Singapore youths cannot live without handphones

Source: KhE 龙 / flickr

“Mobile phones have become more central to the lives of youths in the region, according to a recent survey by research agency Synovate.

And youths in Singapore are setting the pace.

28 per cent indicated they couldn’t live without their handphones – the highest group among Asian youths.”

Source: channelnewsasia.com, 2 Aug 2010

Ponder

1. Do you think mobile phones are inferior goods, luxury goods or necessities?  Justify.
2. With the aid of a diagram, explain how the demand for mobile phones changed over the years.

Carrefour keeps mum on talk of sale

Source: ekainj / flickr

“Carrefour made its debut in Singapore in 1997 and now has two hypermarkets, one each in Suntec City and Plaza Singapura. Both are multi-aisle, one-stop shopping caverns offering food and non-food products which it procures in bulk and can thus sell at customer-friendly prices…

The owner of Fassler Gourmet, Mr Martin Fassler, Carrefour’s supplier of soups and smoked salmon, said he had met Carrefour representatives a few months ago, and there was no hint about it.

‘They just inked a housebrand deal with us. It doesn’t make sense that they are moving out,’ he said…

NTUC FairPrice and the Dairy Farm Group…are the two biggest players in the supermarket and hypermarket industry here: NTUC FairPrice owns the FairPrice stores, and the Dairy Farm Group owns the Cold Storage, Shop N Save, Giant and Market Place chains.”

“Carrefour keeps mum on talk of sale,” Straits Times. 8 Jul 2010.

Ponder

1. From the extract, why do you think supermarkets, and especially hypermarkets, are able to charge lower prices than small grocery shops like neighbourhood mama shops?

Petrol pump prices down

Source: wildsingapore / flickr

“PUMP prices came down by as much as four cents yesterday, in the third cut since May.

Esso started the ball rolling at 4.30pm when it lowered its petrol and diesel prices by three cents a litre.

Shell followed with a four-cent cut at 4.45pm. FuelSave 95 and 98 petrol now cost $1.807 and $1.89 a litre, respectively. The price of diesel is unchanged at $1.333 a litre.

At 5.15pm, Singapore Petroleum Co reduced its 92-, 95- and 98-octane petrol by four cents a litre to $1.747, $1.807 and $1.89 and diesel by three cents a litre to $1.303.

Caltex followed at 6pm, with a three-cent cut to $1.757 and $1.817 a litre for its 92- and 95-octane petrol respectively. Diesel costs $1.303 a litre.

At 7.50pm, Esso cut its petrol prices by a further one cent. A litre each of 92-, 95- and 98-octane petrol now costs $1.74, $1.80 and $1.89, respectively. Diesel is $1.30…”

“Petrol pump prices down,” The Straits Times. 7 Jul 2010.

Ponder

1. What do you call this behaviour?
2. As evidenced by the above, what do you think is the structure of this market?
3. Why do firms in this market structure behave in this manner?

The click and the dead

Source: friskodude / flickr

“Everywhere people bemoan the replacement of the local and the quaint by outposts of big, homogeneous chains. But how true is the notion that the internet in particular has hastened the demise of some retailers, and that those it hurt were overwhelmingly small? A new study on this subject by four economists at the University of Chicago looks at three industries—bookshops, travel agencies and new-car dealerships—for answers…

In the past economists have paid most attention to the effects of the internet on prices. These fit snugly into a standard economic model of competition. The internet acts mainly as a mechanism that reduces consumers’ costs of acquiring information about products and prices…

E-commerce ought therefore to lead to intensified price competition and through it to lower variation, or “dispersion”, in prices… Intensifying competition should lead not just to price convergence but also to a round of creative destruction…

In all three cases the growth of internet traffic and online shopping affected the structure of the industry, not just prices. In general larger firms grew at the expense of smaller ones…

Big firms are not predestined to hoover up all the benefits from e-commerce. The theory suggests that as people become better informed thanks to the web, the businesses that cater most to their desires will thrive. If people want lower prices, then bigger shops and chains, with their economies of scale, may be the ones that do best. But it is equally possible that a small shop meeting a very specific need might see its market share expand because more people who want what it provides (cult records or fan fiction, for instance) learn of its existence…”

“The Click and the Dead,” The Economist. 1 Jul 2010.

Ponder

1. What are the disadvantages of large firms?
2. What are the advantages of large firms?
3. When will small firms exist in e-commerce?

Economists split over Singdollar stance

Source: whoswho / flickr

LESS than a week before the Monetary Authority of Singapore (MAS) releases its next monetary policy statement on Wednesday, economists are still split over what the central bank will do in its twice-yearly policy review…

A new twist has been added to the guessing game now that China looks set to let its currency appreciate soon, according to reports.

Anticipation of a shift in the yuan exchange rate has boosted regional currencies, which have been strengthening in recent weeks. If China does revalue the yuan, that would leave more room for countries in the region to let their currencies appreciate further without fear of making their exports more expensive than Chinese ones.

This includes Singapore. If the Singdollar is allowed to strengthen faster, this could mean cheaper imports and cheaper holidays for Singaporeans, especially to places like the United States and Europe, where currencies are still weak.

On the other hand, a stronger currency means Singapore’s exports to other countries would be more expensive, which may hurt exporters.

Unlike most other central banks, the MAS conducts monetary policy by adjusting the value of Singapore’s exchange rate against a basket of other currencies, rather than by changing the interest rate. There is no fixed target for the exchange rate. Instead, it is allowed to float freely within a band, the bounds of which are set by the MAS and kept secret.

The MAS has three options in tightening monetary policy: It can re-centre the band by moving the whole thing up, change the slope of the band to make it steeper – it is currently flat – or make the band narrower.

UOB economists Jimmy Koh and Chow Penn Nee expect the MAS to shift the whole band upwards in a one-off move, citing the robust recovery in the economy and rising inflation, which may increase at a faster rate in the coming months.

This move would ‘relieve pressure’ on the current Singdollar exchange rate, which they believe is already trading near the top of the MAS band.

With the economy firing on all cylinders in the first quarter of this year, Citi economist Kit Wei Zheng is also predicting that the MAS will tighten policy this month, rather than wait until the next policy meeting in October.

However, he expects the MAS to make the slope of the exchange rate band steeper rather than shift the whole band upwards. ‘The first step for any change in monetary policy stance has always been a change in slope, with re-centring pursued only as a subsequent step,’ he said.

Steepening the slope would allow the Singdollar to appreciate more gradually, giving exporters time to adapt, and would also give policymakers flexibility in lowering the exchange rate later in the year if growth falters, OCBC currency strategist Emmanuel Ng said.

But there are also many economists in the opposing camp who expect the MAS to retain its policy of zero appreciation in the Singdollar.

Among them is DBS economist Irvin Seah, who argues that core inflation – excluding volatile food and energy prices – remains low. Recent data has shown that exports may be flattening out, and a stronger Singdollar at this point could hurt growth, which he expects to come in at 7 per cent for the whole year, he said.

As countries in the region tighten their policies and withdraw fiscal stimulus, ‘it is perhaps best for policymakers to wait for more clarity on the economic outlook in the second half of the year before shifting to a gradual appreciation stance in October’.

Barclays economist Leong Wai Ho also believes the MAS will not change its stance this month, although he said it is a ‘close call’. Inflation may rise in the coming months, but that has to be balanced against debt concerns in Europe restraining global growth, he said.

Source: Straits Times, 10 April 2010

1. What are the pros and cons of a stronger Singapore dollar?
2. How does Singapore’s central bank conduct monetary policy?

Spiderman and Opportunity Cost

In economics, we study how people make decisions. The two principles behind it are: 1) People face tradeoffs and 2) The concept of opportunity cost.

Tradeoffs is something that we will not only experience daily, but also see in comics too! You must have heard of the superhero, Spiderman , who struggles to maintain his superhero and personal life of being Peter Parker, the journalist.

Let’s see how the concept of opportunity cost is seen in his life below:

The Amazing Spider Man #600 by Dan Slott and John Romita Jr. (2009)

In the cartoon above, Peter Parker has 2 choices: 1) To attend his aunty’s wedding rehearsal dinner or 2) To earn money to support his crime fighting acts and life. And here, Peter Parker has choosen 2, which is to earn money. Therefore, the opportunity cost here will be the family time that he would enjoy if he were to go for his aunty’s wedding rehearsal. This is just one of scenarios that Spiderman faces, relative to the concept of opportunity cost.

Now, can you think of any examples in your life that is related to the concept of opportunity cost?

Stabilising Policies & Inflation

Source: Orpheus/ University of California, San Diego

1. What are the two stabilising policies commonly used by the Government and Central Bank to correct a fall in aggregate demand?
2. From the above cartoon, what kind of relationship can you infer between inflation and stabilisation policies?