Question

5 to 7 Sentences for each:

Topic Question: Personal Impact from Coronavirus | How has the coronavirus crisis affected your budget constraint?

Theory:

• Definition of Scarcity/Choices.
• Definition of Opportunity Cost.
• Factors that Increase/Decrease(expand or contract) budget constraints.

Application of the theory:

A real-life situation where you explain the concepts above mentioned responding to the question of how has the coronavirus crisis affected your budget constraint.

• Example/Explanation of personal scarcity and choice(s).
• Example/Explanation of personal opportunity cost due to personal choice(s).
• Example/Explanation of personal expansion or contraction of their budget constraint.
• Conclusion of reflection about the effect of coronavirus on their life.

Answer 1

Because of the coronavirus pandemic, the income has reduced in the informal sector which means a reduction in budget. Most of the industries are experiencing lockdown which has affected the income as well.

In economics, the main concept is of unlimited needs and limited resources. But due to the virus, the choices of goods have changed. Now the choices are limited to essential commodities. Non essential commodities like clothes ,vacations etc are on hold and hence the choices are limited. One has to be careful regarding the way the income is being spend, so that there is no wasteful buying. The scarcity of goods has increased because of panic buying among consumers. This has increased the lines at the supermarkets and has certainly increased the demand for food items even when the demand is not immediate. Due to the spread, there is also scarcity of health products like sanitisers , protection masks etc, the supply of which was limited before the spread of virus.

Opportunity cost is the cost of foregoing the next best opportunity. The opportunity cost of sitting at home is the cost of wages one has to give up. But if a person chooses to work, the opportunity cost would be the risk of health because of the pandemic. So in either case, the opportunity costs during such times are high.

Several factors have affected the budget constraint. Due to reduced wages, or no jobs the income has certainly reduced as stated above. But the governments are also providing coupons or cash transfers, so that the essential items are being purchased and people are able to maintain a Minimum level of subsistence.

This would expand the budget line but the contraction due to no or less wages is more ,so an overall reduction would be seen.

(Comment in case of any doubts)