Question

In: Economics

What economic impacts do you think that covid-19 would have on the product/company , and what...

What economic impacts do you think that covid-19 would have on the product/company , and what measures would you likely take as a manager/owner of the company .Draw any graph to illustrate

Solutions

Expert Solution

In the global pandamic situation due to covid-19 the usual lifestyle of the world has changed.the trade between country is minimal.all the border of all coutries are closed that means no individual can go outside of the country nor came inside the country.all the international flight services are also closed.government suggests individual to stay home and any public gathering is prohibited.many marketplaces are also closed.

So the covid-19 has a huge impact upon production and as the demand falls drastically many producer has to stop production and also many producer annouces bankruptcy and shut down.here with this figure we can elaborate the current situation.here initially the supply and demand for the product a certain prodecer produced is S1S1 and D1D1 simultaneously.the producer is in equilibrium situation at point E where total output sold is Q1 at P1 price before this pandamic situation.now due to covid 19 the demand for the product falls so demand curve shifts downward from D1D1 to D2D2.so the price has to come down.but in this situation the production cost increases very much due to lack of raw materials,increase in transport cost,lack of labour etc.so the supply curve shifts leftward with greater extent.so new supply curve is S2S2.so the new equilibrium is at F where new supply and demand curve cuts.bt here the price is higher than the price before this pandamic situation and quantity sold is lower.

To overcome from this situation firm has to put down the fixed cost and also try to minimize the average production cost.firms may lower it's worker wage rate and also minimise the profit of margin .with these measures producer can charge a little lower price.in this pandamic situation producers have to take certain health measures to protect his workers from covid-19.as if covid-19 spread between workers then the production has to be stopped and it will be worse for producer.producer may adopt new market policies.in this situation people doesn't want to go outside unnecessary so product has to deliver at the doorstep of the customer.for this delivery product may contact some existing delivery partners or can develop his own delivery facilities.one more thing producer can do is start selling products online.this will help buyers to purchase and also increase the demand of this certain product.


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