Class: DP-1 Subject : Economics

Level : HL&SL Marks: 20

Submission date : September 28th , 2020

Task : Given below are 4 inquiry based examples, based on the similar lines
, find examples and answer the questions attached . Each question carries 5
marks

Inquiry based case examples

1.Scarcity and the Hong Kong property market
Hong Kong has the most expensive real estate in world. It is one of Asia’s leading business and
financial centres.  The average cost per square metre of an apartment on Hong Kong Island is
US$16,000. A $446 million mansion for sale in Hong Kong's exclusive Peak district is one of the
most expensive houses ever sold. Renting in Hong Kong is also not cheaper. Family houses in
the best areas rent for anything up to US$30,000 per month. Scarcity in the Hong Kong property
market is a key reason for its high prices.

Hong Kong is one of the most densely populated countries in the world with a density of 6,659
people per square kilometre, which puts it in the top 3 countries for population density in the
world. Lots of people want to live in a relatively small piece of land. It is also a very attractive
place to live, with plenty of high paying jobs, lots to do and, in its own way, it is a strikingly
beautiful city landscape to live in.
Investigate property markets in 2 major cities to see if scarcity has the same effect on
prices.

2.Opportunity cost and military spending in the US:

In 2020 America’s military budget is set to grow for the fifth consecutive year. Republican law
makers are keen to see defence spending rise by well above 3 percent of GDP. The Trump
administration has proposed $750 billion in defence spending as part of its budget plan. At the
same time the administration wants to cut domestic programs, such as education. Under its
budget plan the United States is expected to spend more on its military in 2020 than at any point
since the Second World War.
Government spending decisions represent clear opportunity cost situations. The Trump
administration’s decision to increase defence spending can be viewed in terms of the opportunity
cost of fewer funds available for expenditure on education. The reasons for the US government’s
decision to spend more on defence may well be viewed in terms of the greater political value it
currently places on increased defence spending relative to education.
Research another government decision that involves an opportunity cost.

3. Doing your washing in the Launderette

In the 1960s there was a launderette on every high street in the UK, and in the mid-1980s the
number peaked at 12,500. But rising household incomes and the falling price of washing
machines led to a continuous decline in the launderette market. The Office for National Statistics
in the UK has said the number of Launderette’s in the UK has fallen by over 80 percent in the last
30 years. In 1972 66 per cent of households had a washing machine, but that had risen to 97 per
cent by 2019. The data on the Launderette market shows they are inferior goods and washing
machines are normal goods.

Research another product that has the characteristics of being an inferior good.
See if you can find some data on how sales of the product you have chosen changed
overtime.
Is marketing and inferior good an opportunity for a business?
4. The Swiss prestige watch market

The most recent data from the

Swiss Watch Industry shows sales of watches up 7.1% in 2019. Growth in overseas markets has
been led by Hong Kong (+21%), US (+8%) and China (+14%). The prestige watch market has
seen particularly strong growth with sales up 11%, while watches at the less expensive end of
the market seeing only a 2% rise in sales.  Leading Swiss brands such as: Rolex, Patek Philippe,
Longines and Jaeger-LeCoultre have all seen particularly strong sales growth.

The prestige watch market is a good example of a luxury good and how demand is affected by
rising incomes. But not all watches are at the prestige end of the market some brands at the less
expensive end of the market will only experience a modest rise in sales as incomes rise and for
some demand might even fall.
Research another market for prestige goods and investigate what has happened to
demand in that market over the last two years.