JC Economics Market Mechanism Essay Questions
Are you preparing to attempt the Market Mechanism essay question for your upcoming Prelims or eventual GCE A-Level Econs exams? Usually, this question for the topic is a good backup choice, as it may be the 3rd essay to attempt, after one each from Section A and once each from Section B. For essays on Market Mechanism in your H2 Econs (9757 Syllabus), the required content knowledge is not much, however, you have to be skilled at diagram sketching, as you will need to provide easily 2-4 diagrams in one 25-mark JC Economics essay exam question.
After looking through the entire database of GCE A Level Econs exams since early 90s, (syllabi 9074, 9076, 9079, 9732, etc), the following categories of questions appear for Market Mechanism, that test concepts of demand (DD), supply (SS), elasticity concepts, and price controls.
Account for changes in prices for a market: Especially food and commodities;
Suggest government’s interventions (price control and subsidies/tax) ; with limitations and alternative policies etc
Relevance of elasticity concepts to firms in formulating strategies (may relate to market structures;
Relevance of elasticity concepts to government’s policies:
– Micro-tax/subs for merit demerit goods
-Macro-exchange rate policy, tariffs, income tax etc
Price changes and government’s interventions:
Causes (various economics events), and effects (various markets in terms of P, Q and TR/TE):
Causes: affect either demand or supply => through the working of the market mechanism => affect P, Q, TE/T
Maybe important to take into considerations of related markets.
Evaluations by effects! Thus: extent of the effects depend on the various elasticities, extent of the shift (DD vs SS), and possible government’s intervention; over a longer run also on the possibility of entry of new firms or exit of firms; the effect might also be different for different market structures;
Here is the listing of Market Mechanism essay question list:
Q1. The prices of everyday staples such as bread, flour and beer are set to rise sharply after Russian wheat farmers experienced severe droughts. This triggered panic about future prices of wheat and other commodities and sent wheat prices to their highest since 2007-2008 global food crisis.
Discuss how the droughts in Russia have impacted the expenditure on wheat 
(micro: market for food)
Q2. More food crops are diverted to biofuels as developed countries encourage the use of biofuels and growing economies seek more sources of energy. Encouraged by national biofuel subsidies, some countries are devoting more com to biofuel production, with prices of corn rising sharply.
Assess how the corn, biofuel and oil markets might be affected by these developments. 
(micro: market for food)
Q3. Using economic analysis, discuss the effects of an improvement in technology in the computer tablet industry and its related markets.
Q4. With the use of appropriate examples, discuss the extent to which elasticity concepts impact the effectiveness of microeconomic and macroeconomic policies of governments. 
(micro & macro policies and elasticities)
Q5. Prices of cigarettes have increased by 70% since the year 2000 amidst significant increase in tobacco tax and anti-smoking campaign targeted at women and youths.
(a) Explain why cigarette smoking is an example of market failure. 
(b) Assess the usefulness of the various demand elasticity concepts to the government when considering the proposal to further increase tobacco tax to reduce consumption of cigarettes to the socially ideal level (15)
(micro: market for cigarettes)
Q6. Assess the usefulness of price elasticity of demand, income elasticity of demand and price elasticity of supply to a government in formulating microeconomic policies (25)
(micro policies and elasticities)
Q.7 There were 244, 000 millionaires in Singapore by the end of 2020, a jump of 62% per cent over 2018 and their total income is estimated to have hit over US$500 billion, up by about 18% per cent on the 2018 level. Measures are announced to reduce the inflow of foreign workers, and help our businesses adapt to the permanent reality of a tight labour market.
Using economic analysis, discuss the likely impacts of above-mentioned changes on various product markets in Singapore.
(micro: product markets & incomes)
Q8. In recent years, consumers’ lifestyle has seen a drastic change due to developments in modern technology such as faster internet connection (5G network), mobile application (apps like Qoo10, Lazada, Shopee, ezBuy, etc) and computing devices like smartphones and tablets.
(a) Explain the impact of current developments in modern technology on the markets for broadband connection and computing devices.
(b) Using the concepts of demand elasticities, discuss the extent to which retail stores like Sheng Siong should move away from traditional stores towards online stores to increase their revenue. 
(micro: markets & technology)
Q9. Discuss how far would a knowledge of the various demand elasticity concepts be useful to a government wishing to discourage the use of private cars? 
(micro econs: market failure & congestion)
Q10. The Land Transport Authority (LTA) has announced a reduction in the Certificate of Entitlement quotas. In addition, Monetary Authority of Singapore (MAS) has introduced new rules to lower the percentage of loan one can take and to cap the tenure of the loan at five years.
Discuss how these developments might affect the markets for new motor cars and public transport.
Q11. Discuss how the Singapore government might use the concepts of price elasticity of demand and income elasticity of demand to determine the impact of a recession on Singapore balance of payments 
(macro econs: BOP)
Q12. The European Union’s (EU) Common Agricultural Policy (CAP) has set a price control to help local farmers in Europe stabilise agricultural prices and to encourage them to increase output.
(a) Explain whether the imposition of a price control can help stabilise agricultural prices in Europe. 
(b) Examine whether governments should use price controls to protect producers and consumers. 
(micro: price controls, ceiling and floor, aka maximum price & minimum price)
Q13. China’s economy grew at an average of 10% over the past decade. Under the terms of the EU-China WTO accession agreement, China has also agreed to substantial reductions on import tariffs for over 150 leading European exports, ranging from machinery to wines and spirits.
Assess the combined impacts of the rising income in China and her reduction of import tariffs on the sales of various types of EU’s exports to China and her domestic sales. 
(micro / macro: market for imports)
Q14. Chocolate uses milk and cocoa beans as ingredients in its production. Dark chocolate, with its high cocoa content, is known for its health benefits and hence more consumers have chosen dark chocolate over white chocolate. Meanwhile, the price of milk has dropped whilst the price of cocoa beans has risen.
Assess how expenditure by consumers on dark chocolate and white chocolate will be affected by the above developments.
(micro: market for chocolates)
Q15. China experienced a slowdown in GDP growth in the aftermath of the Eurozone crisis. Under the European Union (EU)-China Free Trade Agreement (FTA). China is reducing tax rates on European goods, ranging from Louis Vuitton accessories to beverages and tobacco.
(a) Explain how China’s reduction in tax rates might affect expenditure by Chinese consumers on the different types of European goods.
(b) Assess the impact of the above changes on the sales volume of different types of goods both in EU and in China.
(micro / macro: market for imports & exports)
Q16.The declining price of technology in consumer electronic gadgets is driven by gains in manufacturing efficiency, lower labour costs as manufacturing moved to lower-wage countries, and improvements in product design.
(a) Explain the impact of declining price of technology on the total sales of consumer electronic gadgets. 
(b) Assess the likely effects of these trends on consumers and producers.
(micro: markets & technology)
Q17(a) Explain the likely combined effect of a decrease in indirect tax and an increase in income on the price and quantity of different types of goods and services.
Q17(b) Discuss what determines whether consumers or producers are more likely to bear the cost of an increase in indirect tax in the markets for goods and services.
(micro: markets & taxation)
Q18. India’s economy has been experiencing positive GDP growth for the past few years. Meanwhile, India has also recently agreed to jointly develop 5G telecommunication services with Israel, a country with the innovation and technology for the latest generation of telecommunication services. (5G telecommunication services include mobile ultra-broadband internet access, high definition mobile TV and video conferencing, faster than 4G by 10 times).
Assess how the above developments will affect the markets of 4G telecommunication services and complementary products in India. 
(micro: markets & technology)
Q19. Sales of electronic cigarettes – battery powered slim metal tubes – have doubled, attracting new firms into the market. Smokers of electronic cigarettes inhale the vaporised nicotine without the chemical, tar and smell inherent with conventional cigarettes. The market for conventional cigarettes has been in steady decline in recent years, and is still facing tax hikes imposed by governments around the world.
Adapted from the week.com
Using demand elasticity concepts, discuss the likely effects of these changes on the revenue earned in the cigarette industry. 
(micro: market for cigarettes)
Q20. Developments in modern technology such as faster broadband and internet connections, and the ease of creating e-books, have had major impacts on the demand for and supply of print and non-print materials.
(a) Explain how the markets for print and non-print materials might be affected by these developments.
(b) Assess the relevance of the various concepts of the elasticities of demand to a publisher of print materials who aims to increase sales revenue.
(micro: market for books)
Q21. Globalisation and technological advancement have caused rising income inequality in the global economy. Minimum wage policy is often implemented in many countries to improve the welfare of low skilled workers and narrow the income gap.
(a) Account for the increasing income gap between skilled and unskilled labour is Singapore.
(b) is minimum wage the best policy to narrow the income gap in Singapore?
(micro: market for labour & minimum wage)
Q22. The rate of closure of bookstores in Singapore has been startling, with six stores in the prime district pulling down its shutters in the last seven months. While the stated reason has been the rentals, the cause has also been attributed to the rise in the number of tablet manufacturers (eg: Kindle).
(a) Explain how the above have affected the retail market for print books.
(b) Discuss whether the closure of outlets and exiting the Singapore market are appropriate moves for the book retailers.
(micro: market for books)
Q23. In the midst of fast pace technological advancement and economic recovery in 2010, the iPad, a revolutionary tablet computer, was launched. Featuring next generation multi-touch applications (apps), it was an instant but with sales exceeding 20 million units.
Assess the impact of the above mentioned recent events on relevant markets. (25)
(micro: market & tech)
Q24. Most people buy luxury wristwatches for their perceived excellent quality or higher status. Others can only afford cheaper brands.
Critically analyse the likely impact of a large fall in cost of production in the midst of a recession on the revenue earned from the sales of different categories of watches. 
Q25. Smartphone usage is predicted to overtake computer usage in the near future. This is due to advances in smartphone technology, greater affluence and, in some cases, addictive behaviour. Assess the impact those would have on the sales volume of different models of smartphones in Singapore. 
Q26. Rising income levels and an ageing population have changed demand patterns amongst consumers in Singapore. Many producers have responded accordingly.
Using economic analysis, discuss the likely effects of these developments on product markets in Singapore.
Q27. The unrest in the Middle East had helped to push crude oil prices up to their highest levels since September 2008. The International Monetary Fund (IMF) warned that high oil prices were a key risk to global economic recovery.
(Source: The Straits Times)
(a) Explain the factors which might have caused the oil prices to rise.
(b) Discuss what determines whether consumers or producers are more likely to bear the cost of the oil price rise.
Q28. China has implemented a policy to reduce production of rare earth metals which are used in the production of X-ray machines, iPhones and light bulbs. Incomes have risen in recent years, especially in the emerging economies.
Discuss the relative impacts on consumers and producers due to the above changes. 
Q29(a) Explain the various concepts of the demand elasticities. 
Q29(b) Discuss how an increase in goods and services tax on luxury goods might influence the revenue of producers of luxury goods and of related goods. 
Critical analyse the likely effects of this demographic change on product markets in Singapore.
(Link to answer to this elasticity essay here)
Q31(a) Distinguish between PED, YED and XED. 
Note: Distinguish must be explain with both similarities and differences
Definition: All measures the responsiveness of changes in quantity demanded w.r.t a change in variable; for PED is the price of the good itself, YED is the income, and XED is the price of related goods;
Signs: PED always negative; YED +ve (normal goods), -ve (inferior goods); XED +ve (substitutes), -ve (complementary);
PED is numbers of substitutes Vs XED is closeness of substitutes;
PED is proportion of income spend Vs YED is income level of consumers
PED is movement along demand curve;
YED and XED are the shifts of demand curve
Q31(b) Discuss the relative significance of the above concepts in determining the impacts of her current account in the balance of payments of Singapore. 
Note: This essay question is a micro – macro mix. Not easy, but can expect such a qn type in Prelims or eventual A-Levels.
Q32(a) Explain, with examples, the concepts of PED, YED and XED.
Q32(b) Discuss the relevance of the various elasticity concepts to a firm in formulating business strategies to maximise revenue. (15)
(Note: The question can be very open and broad, allowing you to choose the firm. Or it can be very narrow, that is, specifying a particular firm, such as new Korean restaurant in Singapore, etc, so tighter application needed)
Q33(a) Explain, with examples, why the values of PED and YED of various goods and services might differ. (10)
Define PED, State factors that will affect values of PED
Apply with examples: Goods (example spar and smart phones) with more substitutes, higher proportion of income spend, and luxury in nature will have higher PED compared to good (example food and public transport) with fewer substitutes, smaller proportion of income spend and necessity in nature;
Define YED, State factors that will affect values of YED
Highlight that YED is a relative concepts, i.e depends on the income level of consumers
Apply with examples: Cruise vs public transport; Smart phones vs normal phones
Q33(a) Discuss the extent to which PED concept determine whether consumers or producers bear more of a tax burden in the market for luxury goods. (15)
Q34(a) Explain the rapid increased in prices of food/oil/ over the past few years. (10)
Q34(b) Discuss the view that price control (or subsidies) is the best policy to minimise the impacts of such price increase. (15)
Note: Government’s policies impacts on:
Consumers: P and Q, CS
Producers: Revenue and profit
For examples: Price ceiling (max price):
Consumers: Lower P but lower Q as well (shortage)
Producers: lower P and lower Q => lower revenue
Q35(a) Explain why the prices of housing in Singapore increase rapidly in recent years. 
Q35(b) Discuss how imposing price controls might impact consumers and producers in the market for housing in Malaysia and the labour market in Singapore. (15)
(Note: SG does not a full fledged price control policy in labour market. An approximate policy is called the Progressive Wage Model.)
Q36. In recent years, many countries have seen a stronger surge in trade, foreign direct investment, technology transfer and labour mobility.
Assess the impact of these recent developments on expenditure by consumers on luxury and non-luxury goods and services. 
Q37. The recent rise in global prices of fuel has affected the operational costs of public transport operators. At the same time, the economy is recovering from the global recession.
Discuss how the above events affect the markets for public and private transport in Singapore. 
Q38. In light of the global economic downturn during COVID-19, the Government has announced a personal income tax rebate and property tax rebate is given for industrial and commercial properties to help reduce the cost of running businesses and ease cash flow issues.
Discuss the effect on market equilibrium of the above budget initiatives for different types of goods & services. 
[Note: A tax raises COP while a subsidy lowers COP.
Further info on subsidy:
How subsidies on agricultural products work, and its impacts on consumers and farmers. Subsidies on producers (farmers) => reduce cop=> supply curve shifts to the right (farmers are willing to produce more at a given price) => surplus => price will fall;
Consumer: benefits because of higher Q and lower P, higher CS;
Producers: depends on PED, if PED <1 (in the case of food), reducing price lead to smaller proportionate increased in quantity demanded, thus TR will fall, however, with lower TC, profit may rise;]
Q39 The COVID-19 public health scare led to an and caused a worldwide recession, both of which severely affected the demand for travel by air. This led to the closure of some of the major airlines companies in Asia and beyond.
Source: COVID-19 & airline failures
a) Explain how the increased fear of flying, recession and the closure of some of the major airlines of the world have affected the market for air travel.
b) Examine the relative significance of the various elasticity concepts of demand and price elasticity of supply in explaining the impacts of these events on the global airline industry.
Q40. In 2015 Malaysia introduced the Sales and Services Tax (SST) at a rate of 6%. She had a GDP growth rate of 5% in the same year.
Sources: SST in Malaysia and World Bank
(a) Explain the likely effect of this change in SST on expenditure by consumers on different types of goods.
(b) Discuss how a combination of a higher GDP growth rate and an increase in SST on luxury goods might affect the quantity of output on different types of goods.
Q41. In 2021, Norway has proposed to implement a luxury tax on luxury electric cars. Her Gross Domestic Product (GDP) is forecasted to grow by 3.4% in the same year.
Sources: Tax on Luxury Electric cars and Norway Economic Forecast, OECD 2021
Discuss how a combination of a higher GDP growth rate and an imposition of a luxury tax might influence the revenue of producers of luxury electric cars and of non-luxury electric cars. 
Q42. Rapid developments in modern technology, such as teleconferencing equipment, faster broadband internet connections, improved have had large impacts on the market for rental offices and related goods and services. At the same time, the COVID-19 pandemic has forced firms’ employees to work from home.
Assess how the markets involved might be affected by the above developments. 
The above market mechanism essay questions are representative of the level of difficulty for your actual Cambridge – UCLES – SEAB GCE “A” level H2 Economics examinations. Is this a good question to prepare for? Yes it is, although this is most likely NOT your first choice in Section A of your Paper 2 (Essays)