Question

How pandemic will affect the market --microeconomics--? and support with theories and example

Answer 1

This pandemic will hit the market really hard as predicted by several economists and IMF as well. As has been predicted this will be the biggest slow down after the great depression. And this will happen because, due to world wide slow down productions are almost nill. People are being locked in there houses. E-commerce is also not working due to lock down. If there will be no effective demand in the market , there will be a bigger stock lying (produced before lockdown) also during lockdown people are either half paid or not paid at all. And unemployment rate has started increasing . If people will have no money to spend even after lockdown is lifted there will be no effective demand. No demand means more inventory with business person. Therefore prices will go down, even though prices are low people will not demand much(as before). So less investment will be maid, less investment will result in more unemployment and less capital formation, again this unemployment will lead to low income and low effective demand. So in short the economy might go into a vicious circle of poverty(theory given by ragner-nurks). If not intervened by government then this recession might turn into a depressionary situation as well.