Question

Focussing upon current UK macroeconomic issues

With reference to the present situation (March/April 2020) relating to the ‘Covid 19’ Coronavirus which is impacting with extremely adverse effects upon the world health situation and much of the world macroeconomy

Explain in macroeconomic terms how the above virus is impacting upon the following economic sectors:

The UK commercial aerospace sector these typically carrying holiday and business passengers; and the UK retail food supply sector (supermarkets such as Tesco, Sainsbury, ASDA etc).

Focus upon the effects which may be impacting upon the short-run and the longer run viability of these businesses, how ‘Bandwagon’ effects may be impacting upon the sectors and the measures that Government can implement in order to influence these outcomes.

Answer 1

Impact of COVID-19 on UK Commercial Aerospace sector carrying holiday and business passangers:-

With the Health alerts being given by the goverment it is predicted that social distancing will become a part of normal life even for couple of months after the Pandemic of COVID-19 is over. This means that UK commerical Aerospace sector will experience a fall in the bookings and thereby fall in the number of customers. After a long lockdown, with no or very little source of income in hand people may not plan for any holidays in a near future(Short -run). Similarly, as the world economy is experiencing a recession, the busineeses will also suffer from the same.On one hand some small business may have to be shut down while on the other hand some business may struggle for survival. In such a scenario, the overall aviation industry may get badly hit due to lack of travelling passangers.

Impact of COVID-19 on UK Retail Food Supply Sector :-

UK Retail Food supply sector is expected to experience just reverse of the Aerospace sector i.e. there is BOOM that can be seen in short-run in the Retail food sector. People's basic survival needs have to be fulfilled by their ownselves or with the help of the government. Thus, in short run people will struggle for food necessities more than travel or any other thing. Here it is also expected that the food supply may fall short of its actual supply as people may stock it up in fear that the food availability may get short of supply in a near future.

Bandwagon Effect may be seen in a near future, i.e. it is a pheonemenon where the rate of taking up of ideas, beliefs increases many folds more than that they have been adopted by others in past. In short, Bandwagon effect shows how people start imitating others in some or other ways which they might not have done in the past. Thius, as a result of COVID-19, people may start taking up ideas of others like wearing mask, keeping social distance, maintaining hygine habits, etc.

Measures that the Government may take to influence these outcomes:-

• The Government may provide short-term loans to the business to re-start their business
• The Government may give some relaxation in taxes to the businesses
• The Government may Purchase and maintain a Buffer Stock of important food grains like wheat, rice, etc . and provide it to its citizen at a low price so that poor people may not die of hunger.