2009-2010
Learning Economics through current issues (2)
Standard Chartered Commemorative Charity Banknotes
StanChart marks anniversary with HK$150 note
The world’s first 150-dollar denomination banknote will be issued by Standard Chartered
Bank, one of Hong Kong’s three note-issuing banks, to celebrate its 150-year presence in
the city.
Benjamin Hung Pi-cheng, the bank’s chief executive in Hong Kong, said, the bank would
offer one million of the commemorative charity banknotes for public sale. These notes are
legal tender and have the same security features as the bank’s 2003 banknotes series.
Single HK$150 notes will go on sale from October 1, at $280 each, at the Hong Kong
Convention and Exhibition Centre and 30 selected branches. Long queues like Bank of
China’s Olympics commemorative banknotes issued last year are expected, Benjamin said.
Other special editions of the banknotes will be opened for application from today. The
application form for Four-in-one uncut banknotes, 35-in-one uncut banknotes & single
self-selected serial number notes are available at its branches and website. People can apply
on-line or by post. The bank will hold draws if there are any oversubscription. Banknotes
with lucky serial numbers are being held for auction.
Extract from/ Source:
Paggie Leung, “StanChart marks anniversary with HK$150 note”, South China Morning Post, September 9, 2009
Alfred Liu and Adele Wong, “New $150 notes are real bang for the buck”, The standard, September 9, 2009
Questions for discussion
1. How many types of 150-dollar denomination banknotes will be issued by Standard
Chartered Bank? What are they?
Five types of 150-dollar denomination banknotes will be offered. They are Four-in-one
uncut banknotes, 35-in-one uncut banknotes, banknotes with lucky serial numbers, single
self-selected serial number notes and single HK$150 notes.
2.
How many commemorative charity banknotes would Standard Chartered Bank offer?
One million
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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3.
Please indicate the methods of subscription for different editions of the banknotes
respectively.



Single HK$150 notes: on first-come-first-served basis
“Four-in-one uncut banknotes”, “35-in-one uncut banknotes” and “Single self-selected
serial number” notes: on-line application or by post. The bank will hold draws if there
are any oversubscriptions.
Banknotes with lucky serial numbers: public bidding
4.
Which of the above application methods can be classified as price competition? Which of
them are kinds of non-price competition?
Price competition: Auction (bidding)
Non-price competition: first-come-first-served basis, by draws
5.
What are the explicit cost and implicit cost of queueing up for buying the single notes?
Explicit cost: The price of the banknotes, i.e. $280
Implicit cost: The highest-valued alternative use of time in queueing for the notes (e.g. the
income forgone).
6.
According to Benjamin Hung Pi-cheng, why long queues lining up to buy commemorative
banknotes are expected? What economic term can be used to describe his expectation?
Since it is the world’s first HK$ 150 banknotes, many people queuing up for buying the
notes is expected. It is estimated that the quantity demanded of the notes is greater than the
quantity supplied, thus long queues are expected. In economics, this relates to the problem
of shortage.
7.
Explain, with the aid of a supply and demand diagram, why the situation mentioned in Q.6
would happen.
It is the first ever $150 banknotes in the
P
S
world, and the bank will only offer one
million banknotes for pubic sale. If the
market price of the notes sets below the
P0
equilibrium price (P0), the quantity
demanded of the notes will be greater than
the quantity supplied, shortage will then
arise. This explains why Benjamin
expected that there will be long queues
lining up to buy the notes.
8.
P1
0
Q0
Q1
D
SQ
Commemorative banknotes

If the problem mentioned in Q.6 really happens, how can it be solved?
 Increase the price to the equilibrium level (P0).
 Print more notes to meet the excess demand.
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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9.
Suppose the problem of shortage really happened, and some people ask the bank to offer
more commemorative banknotes to meet the excess demand. If you were the director of
Standard Chartered Bank, will you adopt this idea? Explain.
Free answers.
P
If the bank offers more banknotes:
S
If the bank offers more banknotes to meet
the quantity demanded, i.e., Q1, the total
revenue of the bank will increase from area
0P1AQ0 to area 0P1BQ1.
If the bank doesn’t offer more banknotes:
With imperfect information, it will be costly
S0
S1
P0
P1
0
A
B
Q0
Q1
D
S
Q
0
Commemorative banknotes
for the bank to know the exact quantity
渣打紀念鈔票
demanded for the notes. Moreover, if the
bank overestimates the quantity demanded of
the notes, i.e. offer the notes beyond Q1, surplus will arise and there will be a pressure to
lower the price. Besides, it can also be a commercial decision not to offer more notes to
maintain the storage value of them.
10. Will you use the commemorative note for shopping? Why?
As the cost of using the banknote (storage/resale value) is higher than its face value, people
will not spend with it for shopping.
11. With reference to Q.10, which function of money can the commemorative notes best
perform?
Store of value.
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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Extended Part
Do you remember in July 2008, Bank of China sold its Olympic notes?
Please read the following news article carefully and answer the questions.
Banknote rush hits a sour note
Hundreds of people queued outside Bank of China branches last night to buy
commemorative banknotes bearing the Olympic logo, which go on sale tomorrow. Some of
them had been waiting for more than 30 hours. Those in the queues include elderly,
housewives and young people. They brought along with umbrellas, mats, plastic chairs and
newspapers for the long wait.
The bank will issue four million commemorative banknotes with a picture of a plinth, the
Beijing 2008 logo, the Bank of China tower in Hong Kong and the image of the Beijing
Olympic Games stadium (the “Birds Nest”). The selling price of the five packages ranges
from HK$138 to HK$1,388. People need to queue for the tickets, entitling the holders to
buy, before they can make the purchase. Each person will be limited to purchase one set of
each type per visit.
An elderly, who was first in line at the King’s Road branch, suggested that there should be a
better system like issuing tickets, so that they don’t have to wait in the street for two days,
especially for the elderly.
Extracted from / Source:
Diana Lee, “Banknote rush hits a sour note”, The Standards, July 15, 2008.
12. How many packages of Olympic Banknotes did Bank of China (BOC) offer?
5 packages
13. How did people buy the Olympic banknotes?
People had to queue for the tickets, entitling the holders to buy the note package, before
they could make the purchase.
14. Compare with Standard Chartered Bank, can you figure out the difference of the
subscription methods between the two banks?
Queuing was the only way to get Olympic banknotes offered by Bank of China, people had
to queue for the entitling tickets before they bought the notes.
Standard Chartered Bank used a range of methods, from queuing up to online booking and
bidding.
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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15. Which bank, Standard Chartered or Bank of China, provided a more flexible arrangement?
Why?
Free answers
Compared with single method offered by Bank of China, Standard Chartered Bank allowed
more flexibility to the public.
16. Two banks provided different subscription methods. Who would prefer the arrangement of
Bank of China? Who would prefer the arrangement of Standard Chartered Bank? Please
discuss from economic perspective.
Free Answers

People who have high cost of queuing up would prefer the arrangement of Standard
Chartered Bank. Offering various methods for applying for the notes can greatly reduce
the waiting cost.

For those non-internet users, they would welcome the policy adopted by Bank of China.
Since their cost for seeking help from others or learning how to use the internet is much
higher than the waiting cost, thus, they prefer BOC’s practice.

If the cost of queuing up is very low (i.e. their value of the highest-valued alternative
use of time is pretty low), they are indifferent to the methods of these two banks.
17. How many note-issuing banks are there in Hong Kong? Which are they?
Three. They are BOC, Standard Chartered Bank and Hongkong and Shanghai banking
Corporation (HSBC)
18. If one of the note-issuing banks decides to issue “Sixty Years of The People’s Republic of
China Commemorative Banknotes”. Can you give it some advice on the application
methods? Explain your answer from the economic perspective.
Free answers
Report:
(1) Compare and contrast the application methods, sales (Any long queues? Appropriate selling
arrangement? Any chaotic situation?) and resale situation of commemorative banknotes
between BOC and Standard Chartered Bank from economic perspective.

Students also can give their opinions or preference and give reasons.
(2) Examine those application methods adopted by Standard Chartered Bank and Bank of China,
which method do you think is the most appropriate? Please explain from economic
perspective.

Students can explain from different dimensions, e.g. in terms of cost-effectiveness, the
amount of deadweight loss etc.
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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Proposal:
(3) If one of the note-issuing banks decides to issue “Sixty Years of The People’s Republic of
China Commemorative Banknotes”, prepare a report to the bank to discuss, from economic
perspective, what it should pay attention to for the application methods.
Learning Economics through current issues/2009-2010/Standard Chartered Commemorative Notes
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