Question

The Covid-19 coronavirus first struck in Wuhan, the capital of China’s Hubei province, at the end of 2019. It quickly spread beyond Asia. The policy responses have mostly been lockdowns of varying intensities and durations. Though there have been many national and even international curfews in the past, perhaps most prominently during the Second World War, there are no examples of lockdowns on a global scale deployed to counter the spread of disease. It is wholly novel to force significant proportions of the populations of the major world economies to stay at home, and mostly indoors. An important observation by economists is the interplay of demand and supply for personal protective equipment (PPE). With relevant facts and figures, you are required to
1. Identify and explain 5 determinants of demand for PPE.
2. Discuss 5 determinants of PPE supply.
3. Explain any two consequences of a shortage in the supply of PPE.

Answer 1

Solution

- Determinants of demand are defined as the factors that are responsible for causing fluctuations in the demand for a product (or) a service.

1.The price of the Good /Service - It plays an important role in the demand for a particular PPE.For Example in low Income countries like India,since the population is huge the govt cannnot afford such huge some solely towards the purcahse of the PPE and look out for cheaper options.example,cheap but effective ventilators were developed by some institutions like Indian Institute of Technology,DRDO which are many times cheaper but as effective as the ones being used advanced countries like Italy,US etc.,

2.The income of buyers - The low income countries try to look out for cheaper options within the PPE as they have huge population to cater to and they are of low income.They try to purcahase only the most essential persomnal protective equipment(PPE)

3.Tastes and Preferences of consumers - For example,in countries like the US,many people do not like to use too much of PPE (except when they are under treatment in the hospitals),so this a kind of their choice.

In countries like India,China,most people prefer to make their own PPE like masks and gloves made of cloth by themselves.So they relatively less prefer those kind of N95 and other costly PPE (except when in hospitals).

4.Prices of related goods and services : Yes this is a factor.Everyone looks out for a faster as well as cheaper options available.

5.Consumer Expectations of the prices : This does not have any impact on the PPE right now as the pandemic is a medical urgency.Nothing is of more priority than human life.But since now in the future,the usage of the PPE will increase as these kind of pandamics take a lot time to go off.

2.

a.The price of the Good /Service - Higher the prices the higher the supply becomes and vice versa

b.Technology : Better technology means more production and less price so more sales and more profit.

c.Taxes and Subsidies : More the Taxes ,more the prices,lesser the demand.More the subsidies,lesser the prices,so more the demand.

d.Prices of resources : Prices of resources like raw materials,human resources,capital equipment,land,etc., will impact the pricing of the PPEs companies

e.Number of sellers : Lesser the number of sellers,the more the pricing power for the exisitng sellers and vice versa..

3.If there is shortage in supply of PPE's then:

(i) It will lead increase in utilisation rate of the exisitng PPE's

(ii) Increase in the price of the existing PPE's due same denand but shortage in supply

(iii) Innovations that lead to development of PPE through new technology,also development of Do it yourself kind of trend in makign the PPE (self-preparation)

(iv) Emergence of new manufacturers locally in many areas,countries to the cater to the unmet existing demand

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