EconomicsToo

In our recent mock exams, some Year 13 students were confused about the concept of contestable markets. Many defined them as simply being a market with high levels of competition. They often went on to correctly explain the benefits to consumers, as a contestable market does have a similar impact on the behaviour of incumbents (firms already in the market). Contestable markets, in contrast to 'competitive' markets, are where the presence of potential entrants acts as a competitive constraint on the incumbent firms, even if these potential entrants do not actually enter the market. In this context, the concept of contestability is used to capture the degree of competition in a market, with fully contestable markets having zero barriers to entry and exit and the ability of firms to enter and exit the market quickly and easily.  I mentioned this common error to my fellow economist, Mr O'Hagan and he shared with me a brilliant analogy he uses to explain contestable markets: Th...

Every year, as we go through the Options process (IGCSE and A Level), parents and students alike have hundreds of questions. And rightly so, the decision is important. But one question we hear multiple times every year is:  "What's the difference between business and economics?" ...and more often than not, this question includes accounting. This post hopes to shed some light on this and help explain the main differences.  At GIS, we like to use an analogy given to us a few years ago by another economics teacher (Mr Stewart...credit where credit is Stew!)…   First, let's talk about Business Studies . Business studies delves into the core areas related to businesses and their operations. The buying, selling, producing and marketing of goods and services.  Imagine a business, let's say it is a factory. Visualise lifting the roof off and peering inside; you see four main sections each with very different things going on... In one area, there is a team of people using ...

Year 9 students at Garden International School ( GIS KL ) are currently facing their first big decision point in their education: choosing their IGCSE subjects for the next academic year. To help guide them through this process, we have implemented a few key steps to ensure that each student makes informed and confident choices. Image source All Year 9s choose 3 subjects, with 2 more in reserve, in case their first choices do not fit into the timetable. To aid in this decision-making process, we offer Taster sessions for all IGCSE subjects over two weeks to give students a glimpse into what each subject entails and to help them determine which ones they would be most interested in and successful in...and those they might be better off not choosing! Furthermore, a specific Options Parent Discussion evening guides parents through to process from start to finish and an Options-focused Parent Teacher Conference (PTC)  allows parents and students to ask questions directly to subject t...

The time has come around again...and now it is the turn of this year's Year 9 students to start thinking about their options for IGCSEs. As popular as ever, economics provides an excellent choice that complements all the other subjects, be they options or core subjects. Here's a little bit about what economics is, why you should think about choosing it, and maybe who should not select it! image source What is economics? Economics is a social science that deals with the production, distribution, and consumption of goods and services. It is a broad field that touches on almost every aspect of our lives, from the goods and services we consume to the jobs we hold and the money we earn. As such, economics is an incredibly important subject to study, and here are just a few reasons why: - Economics helps us understand the world around us: By studying economics, we can gain a deeper understanding of the forces that shape our world, including the factors that influence supply and deman...

The contestable market theory is an economic theory that proposes that a market is competitive as long as it is easy for firms to enter and exit. According to this theory, even if there are only a few firms in a market, if it is easy for new firms to enter and existing firms to exit, the market will behave competitively. This is because the threat of new entrants and the possibility of existing firms exiting will provide an incentive for firms to keep prices low and quality high in order to remain competitive. Watch this video for an explanation of contestable markets for CIE A2 and all you need to know: Limit pricing is a common pricing strategy that involves setting prices at a level that is low enough to deter new firms from entering a market, but high enough to cover the costs of existing firms. Firms may use limit pricing in order to protect their market share and prevent new entrants from gaining a foothold in the market. Prices are set at ATC = AR when the market is perfectly co...

An oligopoly is a market structure in which a few firms dominate the industry. These firms have significant market power and can influence prices. In Malaysia, there are several industries that are considered oligopolies, including: The telecommunications industry: A few large firms, such as Maxis and Digi, dominate the Malaysian telecommunications market. The banking industry: A few large banks, such as Maybank, CIMB, and Public Bank, dominate the Malaysian banking market. The automotive industry: The Malaysian automotive market is dominated by a few large firms, such as Proton and Perodua. The media industry: A few large media firms, such as Astro and Media Prima, dominate the Malaysian media market. Oligopolies can have significant market power and can influence prices. They can also lead to less competition and potentially higher prices for consumers. It's worth noting that the level of concentration in an oligopoly can vary over time, as firms enter or exit the market and as m...