Introduction
The Increasing amount of cars had slowly led to congestions on the road. Many countries are facing such problems. Being a small island, Singapore’s government had found a way to minimize the amount of cars on the road, and the solution is called COE (Certificate of Entitlement). COE is a project designed to cut down the amount of car ownership and the main objective was controlling the amount of vehicles in Singapore. With effect from May 1990, Singapore’s government had implemented COE to regulate traffic so as to avoid congestions on the road. Prior to buying a car, an intended owner will have to bid and acquire a COE before any purchases of car can take place. Each certificate is valid for 10 years, after which the owner can choose either to renew by bidding for another COE or to scrap away their vehicle.

COE prices has reached its highest peak since 2000. Experts initially were expecting a $3000 to $5000 increment but instead, it went up by $15000. Industry players were expecting a further increase on COE the following year. (Khamid, 2010) Furthermore, during 2011, COE prices increased 16.9% for small car, from an amount of $48,006 to $56,112. On top of that, there was also a 13.1% increment on premium big cars previously from $65,058 to $73,600 (ng, 2011)

* Applying Concepts
Law of demand If all factors are equal, the higher the price, the lower the quantity demanded.
Therefore, with the increment of the COE prices, the quantity demanded will eventually decline. Rising of prices will ultimately lead to other alternatives such as substitution and income effect.

* Substitution Effect
The substitution effect is an idea whereby when prices of a good and service increase, consumers will therefore replace a more expensive product to a less costly option. This will result in the decrease of quantity demanded for good and service. As