Archive for the ‘Economics’ Category

Cross-elasticity in everyday life

Wednesday, May 9th, 2012

What if your tax rate was lower?
Well, I would probably get more post-tax income.

For every dollar less of taxes, would you get one dollar of additional post-tax income?
No, because I might get a lower salary.

What if the government dictated that rent in my area was not to increase more than 1% a year?
My rent would probably be cheaper than rent in other areas.

Isn’t that great?
Well, not if the house falls into disrepair because the landlord find it not worthwhile to maintain the property after a few years.

What if the government raised taxes on companies?
Companies will pay more taxes.

Isn’t this a good thing?
Well, things might get pricier too, as those new costs are passed on.

Cross-elasticity is a very broad phenomena. Any profit-generating activity that involves multiple inputs and outputs has many ways of adjusting those inputs and outputs to maximize value (be it profit or consumption), and when prices are changed for one input or output it will affect the demand / supply of the other inputs and outputs in some way that can be difficult to anticipate.

To assume that the only change would be in the adjusted input / output is naive.

Related video:


Singapore home sizes

Saturday, May 5th, 2012

It’s obvious that homes in Singapore are smaller than those in the US and many other parts of the world. Why is this so?


  • What percent of Singaporean household income is spent on housing? How regressive is this? How do we account for purchases using retirement funds (CPF)?
  • How does the demand curve for living space depend on household size and demographic group?
  • Do school districts have an observable influence? What about expat areas?


  • What proportion of the cost of an apartment due to the land?
  • How linear is the dependency between apartment value and apartment size?
  • How much cheaper are apartments with longer commutes?
  • How big is the effect of regulatory limits on living space to land ratios?
  • Does it make sense for the government to manage house prices because of their role as household collateral in a fractional reserve system? Are there significant interactions with monetary policy?
  • How much monopoly profit does the local building industry enjoy?