Question

The Covid crisis has disrupted many markets both on the supply and demand sides. Identify markets that have been negatively impacted on the supply side. What happened? What caused the disruption? Have there been surpluses or shortages in these markets? Have any markets thrived? If so, which markets have done well and why?

Note: In order to have a market, there must be both buyers and sellers. Demand reflects the behavior of buyers. Supply represents the behavior of producers and sellers (not all sellers are producers). A surplus occurs when the supply exceeds demand at the existing market price. There is a shortage if the demand exceeds the supply at the existing market price.

Answer 1

The current downturn is a result of a conscious decision taken by authorities to contain the health crisis and the virus led to a complete shutdown of international trade, industries, and organizations inducing an economy into supply shock. The lockdown led to increased unemployment but has predominantly affected oil, airline, and small businesses around the world.

Due to the lockdown and restricted movement the need for fuel and oil has reduced drastically hence affecting the supplier of oil like Saudi whose main revenue was from the export of oil. Hence induced a surplus as supply was more than the demand. The global oil demand is estimated to fall by around 10 % that is from 99.9million BPD to 90 million BPD. The major reduction in demand is due to fall in airline turbine fuel as flights were all canceled and also the shutdown restricted vehicle movement hence motor vehicle fuel need also reduced. Small business, have been affected as not only are they having a shortage but also a fall in demand, for instance, a coffin makes in Afghanistan has stated to a channel that although deaths are taking place his business is not doing well as people are burying the body with cotton as don't have the purchasing power to even buy a coffin.

Industries that have thrived are online shopping and app companies as due to the restricted movement people ended up at home hence increased use of technology and phone. Today majority in India purchase from online groups like Big basket, Flipkart who have recently even started providing essential commodities and groceries. Zoom app and certain other apps have gained precedence along with online tutoring apps as academics have also been predominantly online.