Tuition Wednesday Essay
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Transcript of Tuition Wednesday Essay
Wireless@SG is a wireless broadband programme developed by Info-‐communications Development Authority of Singapore. Registered Wireless@SG users are able to enjoy free wireless broadband access with speeds of up to 1 Mbps at public areas within its coverage. Wireless@SG is powered by the network of three wireless operators: iCell, M1 and SingTel. a) Explain the key differences between “public good” and “merit good”, and consider whether
Wireless@SG is an example of a public good. [12] Intro Define Public Gd & Merit Gd *Don’t talk abt mkt failure intro cos qn never ask why mkt fails! Body (key differences between public & merit goods) Degree of rivalry
Public goods Non-‐rival in cnsmption which means that the consumption of the good by one user doesn’t diminish the amount of the gd available to additional users. à MC of providing to additional user = 0 eg national defence as the provision of national security protection for one citizen doesn’t diminish the level of security provided to additional citizens.
Merit good A private food and may be rival in consumption, eg healthcare service, when one user goes for health screening, it will diminish the resource available such as time or disposable thermometers to additional users
Wireless@SG, on the surface, seems to be a public good. Access to the network by one user does not mean that an additional user will be excluded in the consumption ie it can support multiple users Yet, closer examination on the mkt à as more and more additional users access the network, this will slow down the speed of access à additional user can lead to rivalry in consumption in terms of speed of access
Degree of excludability
Public goods Non-‐excludable to a non-‐paying user ie it isn’t possible to prevent a non-‐paying user from enjoying the benefits of consumption of a good à potentially lead to a free-‐rider problem since there is no incentive for crs to pay eg once a pedestrian sheltered walkway is built, it isn’t possible to prevent non-‐payers from using the walkway.
Merit good Eg, education à it is possible to exclude non-‐payers of school fees from enjoying the service
Wireless@SG seems more likely to be a merit gd rather than a public gd. Only registered users can enjoy the free access. Similarly, if charges need to be imposed, non-‐payers can be easily excluded via non-‐registration.
Extent of provision in the market/extent of market failure & govt
Public gd Due to non-‐rivalry in consumption, the marginal cost of providing the service to another user is zero, while non-‐excludability gives incentive for crs to conceal their demands, which leads to free-‐rider problem.
Merit gd It doesn’t face the free-‐rider problem and a direct charge can be levied on the user as it generates private benefits to consumers (a healthier life). Yet, there is some of
intervention To achieve allocative efficiency in resources allocation, price must be equal to marginal cost and in this case, price equals to zero. Moreover, the free-‐rider problem means that producers wont be able to price the goods as there is no expression of demand. As such, it is not profitable to produce the good and hence, there will not be any production of any public goods à complete market failure
govt intervention as merit goods are deemed to be under-‐consumed if left to the free mkt. consumption of healthcare provides an external benefit to firms such as from having healthier and more productive employees, who will help firms to earn higher profits. These external benefits are not reflected in the price of the good.
Conclusion In this light, Wireless@SG seems more likely to be a merit gd rather than a public gd. Wireless networks have been provided by the various telecommunication companies profitably. The main reason for govt intervention is due to under-‐consumption rather than non-‐provision. b) Discuss the extent to which the Singapore economy would likely benefit from the free
provision of Wireless@SG. [13] • Explain that Wireless@SG is a merit gd as concluded in part (a) • Explain how there is a divergence between PMB & SMB • Explain the 3rd party benefits, quantify this benefits to the economy!àunder-‐consumed if
left to the free mkt • Explain how free provision will result in shifting PMB to meet up to SMB
Evaluation 1: • Cost to wireless network operators – loss of profits in the SR as compared to when it imposes
charges on every use of wireless network, especially when wireless network is considered as a necessity in which the demand will be price inelastic. yet, MC for providing for the extra user is near zero
• Moreover, as the society becomes more wired and technologically advanced à higher DD for higher bandwith (higher than 1Mbps) à higher DD & à profits in the LR
Evaluation 2: • Not all group of people will benefit this especially the less tech-‐savvy people • May need to encourage the narrowing of the digital divide • Yet, needs the use of communication devices such as mobile phones and laptop conputers • Extent of which depends on whether the lower-‐income group can assess to such hardware • In itself may not be sufficient à need to be complemented with other programmes such as
providing for cheap laptops to schools and educating the masses, especially the less tech-‐savvy group of people
Overall conclusion/evaluation The Sg economy will largely benefit from the free provision of Wireless@SG as wireless network has increasingly become a necessity especially in this digital era. Wireless network can help in every aspect of life, such as social life and education. Moreover, free provision reduces the problem of under-‐consumption and hence, leads to a greater efficiency in allocation of resources. The extent to which it benefits will largely depend on how accessible it is. The govt may need to complement with other policies such as education or advertisement about the free provision of Wireless@SG to better enhance the effectiveness of this free provision.