Real life examples of econ theories


Specific topic/concept Main details: place, date, brief context
Positive externalities of production Training provided by firms.
Positive externalities of consumption Vaccines.  

As women consume more education, they’re likely to pay more attention to their kids’ healthcare, generating positive spillover benefits (better living standards).

Monopoly power Luxotica/Dos Pinos/Standard Oil.
Collusive oligopoly OPEC.
Demand-inelastic good Daraprim (that famous cancer drug) was increased by more than 50 times but demand barely changed (except for those who simply couldn’t afford it anymore) ( Also, a very similar thing happened to EpiPens in 2016.
Effect of price floor => buying off surplus Crop/cattle destruction as a way to get rid of the surplus that the government was forced to purchase to protect domestic producers (happens in New Zealand with sheep and in the US with cherries). During the Great Depression, tons of oranges, potatoes, and pig carcasses were deliberately destroyed.
Tax cuts Corporate tax cuts in 2014 in Australia in order to incentive investment. Or JFK’s notorious business tax cuts in 1962 and household tax cuts in 1964 (implemented by LBJ).
CAR protection => cap and trade ITQ in New Zealand (tuna) and Kyoto Protocol (emissions trading).
CAR protection => regulations Free Fishing Days in the US => only days when an individual with a license is allowed to fish (varies by state, but usually no more than 5 times per year).
Specific indirect tax Since 2015, a 5p tax on plastic bags in Scotland reduced their consumption by more than a half and is minimizing negative externalities of consumption.
Price discrimination (3rd degree) Soccer match tickets are cheaper for women in Sweden.

Movie tickets

Economies of scale Samsung in South Korea (uses abnormal profit to invest in research and development => actually shifts LRAS => could be used to argue for profit maximization).
Price Ceiling Rent controls in NYC (a set maximum on what you can pay for rent), yet people get around it by charging extra for stuff like keys.
Natural Monopoly Petrobras in Brazil (a monopoly on petroleum). Petroperu, Petro-Canada.
Supply shift In 2011 in Japan, there was a tsunami and an earthquake that destroyed many factors of production, thus shifting the supply of most goods to the left.
Price floor Minimum wage in any country. The EU has a Common Agriculture Policy that imposes price floors on produce.
Subsidy The Affordable Healthcare Act (Obamacare) provides subsidies to certain low-income groups in order to increase the Americans’ access to healthcare. US subsidy on corn and cotton.
Perfect Competition Watermelon markets in China.

Airline companies

Monopolistic Competition Shampoo or other toiletries brand.
Non-Collusive Oligopoly Jet aircraft market: Airbus and Boeing are the dominant firms.  

Nike, Adidas, Puma

Minimum price Scotland is currently proposing a Minimum Unit Pricing program for alcohol, which would impose a price floor on it in order to reduce the negative externalities and the levels of consumption of this demerit good.
Maximum price In 2008, H. Chavez imposed price ceilings on food in order to ensure that consumers got enough, yet that caused shortages and smuggling food and hoarding.




Specific topic/concept Main details: place, date, brief context
Expansionary fiscal policy Kennedy’s tax cuts in 1962 and 1964: cut corporate and household taxes in order to boost economic growth.
Contractionary monetary policy LBJ (1964-1969) decreased government spending to prevent inflation and decrease national debt as he didn’t want to raise taxes.
Monetary contractionary policy India’s reserve bank in 2008 has raised its interest rates to reduce high inflation
Monetary expansionary policies Austria increased money supply in 1920 to boost the economy
Structural Unemployment As many mines were shut down during the military conflict in Ukraine in 2014-2017, miners found themselves unemployed due to the decrease in their industry.
Deregulation In 1978, the American government deregulated airlines (stopped controlling the routes, etc), which increased the competitiveness of the market and reduced fares, yet also some less popular routes were eliminated and small airports suffered greatly. (
Multiplier effect Any country hosting Eurovision (e.g. Ukraine in 2017) => money invested into infrastructure and workers’ wages ends up being injected in the economy and multiplied due to MPC => economic growth.
Cost-push inflation Chile under Allende in 1971 as he kept increasing the minimum wage, resulting in cost-push inflation due to more costly factors of production (labor). Oil crisis of 1973 in the USA => an increase in the cost of raw materials caused inflation.
Demand-pull In the recent years, India’s AD has increased due to a population increase and an increase in the quality of living of Indians, while AS has not responded accordingly.
Seasonal unemployment Seasonal hotel workers in any touristy country => in Greece during the winter perhaps as hotels shut down for the winter.  
Deflationary gap Almost any country would operate at that if they have more than 5% of employment, which would mean that the economy operates below full level of output, so like Canada, Costa Rica, Ukraine, etc.
LRAS shift Research and development by Samsung in South Korea actually shifted LRAS to the right.
Market-based SSP Centrenergo, a company in Ukraine, was privatized and became more efficient. Yet, privatization resulted in a lot of job loss and it was sold for a very low price, hence little government revenue.
Structural unemployment Manufacturing jobs in the USA!

Agriculture sector in Vietnam recently

Deflation Japan had been experiencing deflation since 1990s due to tight monetary policies, little borrowing from banks, cheap raw materials, and unfavorable demographics.
Phillips Curve Mirrored the situation in the UK between mid-1800s and mid-1900s.
SSP => Privatization Japanese trains were privatized in the 20th century, reducing budget deficit and increasing efficiency.
Contractionary fiscal policy Bill Clinton increased household tax for the upper bracket and also, cut down some benefit spending.


Pros of R&D Nokia did huge investments in R&D in the 80s. By the late 90s, Un had been cut in half
External economies of scale Universities created courses to supply the high tech industry’s needs in Finland with the rise of Nokia
Gov intervention helped recover from recession 1800s US tax on cotton imports lead to more local trade, employment, income and GDP
Gov. intervention increased UN 2016: Australian subsidies on windmills increased UN because they need no workers to work
Gov. intervention decreased UN 2013: Egypt raised min wage, and increased spending, GDP from 2 to 3.5%


International Economics and Economic Development


Specific topic/concept Main details: place, date, brief context
Dumping US dumps cotton into Mali, and cotton is the way most domestic farmers survive, so there’s a damage to livelihood.
Overspecialization In the Bahamas, more than half of the population work in the tourist industry, so when there was a crisis and less tourism post-2008, there was a large drop in growth.
Con of trade => child labor Bangladesh, in order to produce textiles, employs more than 5 million child workers.
LDCs not paying taxes In India, less than 3% of the population pay the household tax.
Con of FDI In 2006, in Chicago, there was a study demonstrating that setting up a Walmart in the area reduces political participation and local businesses.
Pro of FDI Pepsi in India is helping build infrastructure and generating positive externalities of consumption.
Embargo US-Cuba!

US-Japan (not a full embargo, but on most goods, including oil) right before Pearl Harbor