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Explain the likely reasons for the increase in the car population in Singapore, from 370,000 cars to about 515,000 cars, from 1997-2012. [10]


The growth of the car population by almost 40% can be attributed to the rise in demand and supply. There are several factors that might have caused the growth such as changes in tastes and preferences, increase level of income and wealth, decrease in factor prices, increase in productivity, etc. Hence, this essay aims to discuss the demand and supply factors that have contributed to the growth, especially in Singapore.

The growth of car population can be influenced by rising demand. There are several factors that results in a rise in demand of car population. Firstly, a change in tastes and preferences are influenced by reasons such as increased advertising by car firms, encouraging more buyers, and thus the increase in car population. 
Secondly, as the economy prospers, the increase in level of income and wealth also encourages the growth in car population. Rising income levels to rising ability to purchase cars as consumers or households have more disposable income to spend on quality products such as cars. Hence, cars are considered normal goods as demand for cars rises with income. Also, income that is not spent on consumption is often used to purchase assets resulting in the accumulation of wealth. A booming stock or property market raises the wealth of households, thus raising the demand for cars as well.
Thirdly, the price and availability of related goods also contribute to the growth of car population. Substitutes are goods which are considered to be alternatives to each other and be in competing demand. In this case, a substitute for owning a car could be taking cabs in order to travel around. A rise in the price of cab fares raises the demand for cars as consumers may switch away from the one that they perceived to be more expensive. On the other hand, complements are goods that when consumed together gives rise to higher combined utility than if the goods were consumed individually. Complements are said to be in joint demand. A complement in this context can be the roads. The availability of well-constructed and well-planned roads can stimulate the demand for cars as there will be greater ease of travelling.
Lastly, the greater ease of acquiring credit can also increase the demand for cars. Consumers often borrow to finance their expensive items such as cars. For example, a reduction in interest rates or relaxation of financing rules will encourage more consumers to borrow to consume expensive goods such as cars, thus causing the demand for cars to rise. 
Apart from the rise in demand, the growth of car population can also be influenced by the rise in supply. Firstly, a fall in the prices of variable inputs lowers the marginal costs. In this case, a fall in the prices of steel of cars decreases the cost per unit output thereby increasing supply.
Secondly, higher productivity means more output can be produced using the same amount of resources, thus increasing supply. Technological advancements can allow greater output to be generated as it is more efficient and done with lesser error. 
Lastly, the entry of new firms in the car market increases the supply of cars. An increase in size of existing firms also increases the supply as firms raises the total capacity of the industry. The expansion of firm may also result in greater economies of scale, thus lowering production cost.
In the context of Singapore, thriving economic growth have increase the level of income and the affluence of people. Hence, this becomes a contributing factor as cars become affordable and many would prefer to have a car for ease of travelling.
Also, with increasing cost of public transport, which may be considered a substitute, many may switch to buying cars instead. The rising demand for cars can also be partly due to the breakdown in public transport that affected the level of confidence of it, hence people may choose to switch to cars instead. The better transport networks such as roads and highways in Singapore encourage more people to travel by car as this mode of transport is the most efficient way of getting around Singapore.
However, in Singapore, the supply of cars is limited by the government through rising car taxes and Certificates of Entitlement (COE). The rising cost of owning a car deters people from buying despite the ease of travelling.
In conclusion, we can see that the car population growth in Singapore is largely stimulated by rising demand instead of supply. Hence, in the long run, the government may aim to reduce car population by increasing the prices of car and COE to curb demand. This way, as the price of COE increases and prices of car takes a large proportion of income, people may be deterred from it.

JC Economics Essays - H1 H2 'A' Level Economics: economics tutor's comments - This economics essay is generally well written, as it is clear cut, direct, to the point, and addresses the requirements of the economics question directly. Always remember to answer the economics question as it is posed and structured, so that the examiner knows that you are addressing the question directly. In this case, the economics essay question requires the student to use the skill of application - apply the theoretical demand and supply model to the car market context of Singapore, to explain the rise in the population of cars.

It should be noted that familiarity with the standard workhorse model of introductory economics, demand and supply, is very important. (Most economics courses cover this useful economic model early on because of its central importance to economics, both at A levels and at first year undergraduate, university, and college economics courses too.)

This economics student, in his writing, has demonstrated the skill of verbal application and can explain the various factors affecting demand and supply. This is good.

However, the economics essay answer could have been greatly improved with the use of an economics diagram, and in this case the diagram should show both demand and supply increasing. Always remember to use good, clear, relevant, well-labelled and useful economics diagrams to answer economics examination questions.

Special thanks to J, A, S, and other economics students for their kind, invaluable and useful contributions. Thanks for reading, and cheers. 

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