Question

Buyers determine demand while sellers determine supply. Both laws of supply and demand establish market forces that make economies work to search for their market equilibrium. The impact of COVID-19 is an unprecedented event that affects the global economy. In the article, the overall retail sales dramatically dropped by 34.8%, with jewellery and luxury goods drop of 67% but supermarkets increase of 12%, in the first five months of 2020. However, online-based consumption, like demand for food delivery, online education (Zoom), stay-at-home activities and online grocery shopping surged dramatically since the outbreak of pandemic.

1) Based on your learning in Microeconomics, explain how COVID-19 has a favourable and an adverse impact in today’s situation, with aids of diagram “Market Forces of Supply and Demand” and “Elasticity”.

2) Illustrate with TWO real examples (one favourable and one adverse impact) in the retail industry in Hong Kong or Mainland China or your country to show your understanding and application of supply and demand as well as elasticity.

3) Principle 6 of Economics states, “Markets are usually a good way to organize economic activity”. Hopefully COVID-19 will end some time in the near future. Predict how the retail industry would become in the economy with the aftermath of the pandemic.

Answer 1

1)market is said to be in equilibruim when demand is equal to supply.covid 19 has a huge impact in the economy.

-Direct impact on production:

chinese production has already been substantially affected by the shutdown in hubei province and other areas.some other countries are also beggining to feel direct impact as there authorities put in place similar measures.

-supply chain and market disruption:

many manufacturing firms rely on imported products from different countries such affected through disease .

transportation restriction will have huge impact on global firms since there products are diatributed against different parts of globe.

-financial impact on firms:

Due to this condition many firms face problem of financial liquidity since decrease in operation of there products or services.traders in financial markets may or may not anticipate which firm is vulnerable.

2)many areas is getting affected by covid 19 such as theatre ,malls,gyms,schools.

however some products is getting huge sales such as sanitizers,masks.

due to this covid 19 theatre,gym etc.has been shut down so they are making zero profits as there services is shut down.

however products like masks,sanitizer increased there demand drastically as every individual is using it.the demand for such products increased drastically and supply also get increased many new firms started to produce such products.

3)many changes will made in retail industry such as:

Accleration of e-commerce:

The corona virus pandamic will accelerate e-commerce adoption,as many experiments with and even become reliant on the online channel while in isolation.many new e commerce apps has been introduced to offer the products to the buyers.

Contact less payment:

It means making the payment easier and with full of records of payment details.no need to carry any physical cash payment can be done through various online mode by secure.

Digital revenue growth:

retails can get there digital revenue increased through various online strategies by attracting customers.such as providing discount coupon,offering free products and so on.it may increase sales of retail industry.

e-commerce also increases efficiency by various ways:

Reduction in time to complete bisiness transactions,from delivery to payment.

Reduction in errors,time for information processing by eliminating the need to re enter the data.