Question

During the novel coronavirus (COVID-19) pandemic, people of all incomes from poor to rich are stocking up on different types of product they regard as necessary. Suppliers cannot increase their output quickly enough. Singapore government is concerned about profiteering and affordability in the markets concerned and is considering intervening. Using the demandsupply model, explain these phenomena in one or two markets of your choice. Advise which market interventions, if any, government should conduct in these markets.

Answer 1

The spread of novel corona virus across the globe has not only affected the human life, it has also made some huge impacts on the world economic systems and the consumer behaviour patterns across the globe. Most of the industrial establishments have been shutdown and much of the economic impulses have been stalled which is having serious implications on the economy of the globe. The global lockdown measures have forces each nation to limit international trade to essential services which has brought down the development of non-essential sector of the economy. The inventory management of various suppliers have been affected on a large scale, the supply chain systems have been destroyed both locally and globally which has lead to difficulties in maintaining the supply-demand equations which holds an ‘invisible’ hand in maintaining equilibrium of economies around the globe. Although the impacts have been almost similar in most of the economies, there have been reported variations of the impacts on local economy based on how well they are managing the spread and containing the society. Let us consider two different types of economies ie; America, a well known capitalist economy and India, the pioneer of mixed economy in the world.

Impacts on American economy

· It can be seen that being a capitalist economy, from the beginning, more importance was also given to maintenance of the economy along with containment of the disease

· Due to the above factor, the lockdown measures were deferred which had a serious impact on the widespread of the disease.

· There has been rising demand for medical equipment including ventilators and medicines which has forced the economy to defer the cost of many sectors and diverting the same towards the health sector.

· The continuous need for medicines forced the economy to buy medicines from abroad, which has caused a decrease in the foreign exchange of the nation

· Various stimulus packages have been introduced which includes the $2.2 trillion package on a $22 trillion economy which has reduced the potential of fiscal mechanisms.

Impacts on Indian Economy

· With mixed economic principles and early containment of the disease, Indian economy is believed to be one among the lowest that has been hit by this pandemic.

· The introduction of various stimulus packages have helped various sectors of economy to fuel their growth

· Still, the non-essential services and various industrial units have not been allowed to expand which has stalled many economic transactions in the nation

· The labour and other basic sections of the economy have been provided with stimulus packages so as to keep them within the economic system

· The interest rates have been reduced which has helped in reducing the savings and the maintenance of monetary flow in the economy

· The real estate and financial markets have been under the scanner and thus expansion has not occurred in the post-pandemic times.

· Inter state trade has been limited to essential commodities and has thus resulted in the stocking of non-essential commodities at the point of origin due to non-functioning of inventory movement and supply chain

Although there have been various economic impacts across the globe, the governments across the world have made may fiscal and monetary interventions that have been able to install confidence in the economy. The following measures can be adopted by the government in the market so as to bring back the economy to stability.

· Due to fall in domestic trade, interventions can be made to bring in the left over working population in generating and manufacturing of various needs that arise in covid times like healthcare needs.

· Interest rates can be reduced to promote spending in the market and prevent savings so as to maintain monetary flow in the market.

· Stimulus packages can be introduced to include various leftover sections in the economy as seen in the above cases

· Although taxation is not advised in these times, a progressive taxation policy could be thought of after the economy is showing signs of stability

· Limited international trade could be promoted so as to maintain foreign exchange policies.

· The government could sell bonds so as to induce money in to the system as done in the American economy.

                                                  The above measures could help to make the economy feel better and would help to maintain a balance at these times which can lead to a stablility in the market once the danger of this pandemic gets over.