Question

1. Name 3-5 types of products that experienced a decrease in demand due to COVID-19. Explain why the demand for these products declined.

2. Graph the original demand function for these products and its response (shift) due to COVID-19.

Answer 1

The COVID 19 outbreak is causing big issues in international economics as countries are going in to lock down mode in which all people are advised to stay back home and are not allowed to go to work. This has reduced the demand for anything which is not essential as shops remain closed and people fear that they may contact the disease.

As a result of the strict measures however, the demand for the following products is rapidly declining and will continue to fall if the government does not intervene.

1) Meat and poultry products are seeing a rapid decline in consumption as people now fear, that consuming meat may make them more vulnerable

2) Cars and Automobiles are also hit hard as production is stopped and the demand is rapidly falling as people do not have the required money to go for new purchases. People have deferred high value purchases as they lack the required money for the same.

3) Tourism is often sold as a package as it increases the sale of local markets and a lot of business is tied to the same. With lock downs in force, every industry tied to tourism would fail.

4)  Textile and industries such as Clothing, Apparel and shoes is also experiencing a steady declining. With supply lines shut these industries will be worst hit as consumers look to save more money than they spend.

A demand curve representing all of the cases is as follows:-

Here we see that quantity is represented on the X Axis, whereas the Y Axis represents the price of the goods which were sold earlier as well as today's quantity as well as price. We see that the quantity has shifted due to which, the demand curve has shifted leftwards and it has resulted in a situation wherein even when companies are charging the same price from the consumers, the quantity demanded is low.

Please feel free to ask your doubts in the comments section if any.