Question

Word limit: 800-1000 words

Questions: 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. 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

Q1) Favourable Impact - COVID-19 has given favourable impact and huge increase for necessaries when the situaion occured as Customers were not in a position to come out of their houses and had to depend on online delvery system giving massive rise to on-line business especially in case of necessities without which survival is impossible. The Sellers and Manufacturers had a favourable time as they were allowed to carry on with their business through packing and delivering the goods with the exceptions given specifically to them by the Governments. In this Case, we can say though the sales were not upto the expectations, the little business which happened helped in saving the disastorous impact of GDP.

Adverse Impact - As COVID-19 situation occured all of a sudden, firms dealing with Comforts especially Car industies, Goods which fall under comforts like AC, TV, Computers had an adverse impact on the industries and massive decline in the business. As a result, huge losses had to be faced by the Industries dealing with these goods. In this Scenario, there was a hit to the GDP of almost all industries.

Q2) Retail industry in Hong Kong or Mainland China or India during COVID-19 -

A) Favourable Impact:

1) The only favourable impact as per my view with regards to retail industry in any Country especially Hong Kong, Mainland China and India was the Governments and all other Companies were not required to re-imburse any of the expenses which usually had to be reimbursed when people travel for Business travels where Claims for Accomodation, Food, Travel, Stay and  all the other expenses related with travel were completely on halt.

2) As a result, the Governments and the Companies had a sigh of relief that they wont be required to make the pay-outs and process any such claims till the end of this situation.

B) The adverse impact:

1) The Travel and tourism had an adverse impact on retail industry in Hong Kong, Mainland China and India as no travel was allowed and no person was willing to take the risk of travel due to the threat of spread of the virus.

2) Unfortuntely, As the virus broke out from China, it had a worse time in it's history with almost nil business as even local people not coming out due to the increase in death rate and infection.

3) This impact will be remembered for a long time as it hit the business of the retail industry which is still taking time to recover and expected to take more time to start it's travel and tourism operations.

Q3) There is no doubt that Markets are a good way to organize economic activity, I feel the following ways can be predicted that will be helpful for retail industry in the economy with the aftermath of the Pandemic:

1) Demand fluctuations have to be managed in a significant manner as except Grocery and medical stores no other, business operations were allowed especially in the red-zones. A Careful thought process is required to manage the demand fluctuations so that, there is no further threat of spread of infection which will help in the recovery.

2) Cash reserves of the industries have to be taken care seriously while spending and try to convince the wholesalers to go for credit business for certain time.

3) As there has been already loss of life, protection of people and ensuring their safety has to be given high importance sothat the Customers do not have the threat of the virus.

4) The Retailers have to think about the supply changes by reaching out Customers and taking their feedback to ensure that there is a balance in demand and supply situation.