Question

During COVID - 19 pandemic everyone forced to use face mask. Explain the effects of this
action on the face mask market. Comment on the 2 (TWO) price elasticity of demand
and 2 (TWO) price elasticity of supply for face mask. Identify the market structure for face
mask and discuss 3(THREE) characteristics of face mask in related to the market
structure. You may use diagrams to support your answer.

the answer should be around 900 words

Answer 1

In the diagram, note that the demand curve is steeper than the supply curve, indicating the inelasticity of demand for face masks.

Elasticity of demand is the degree of responsiveness of the quantity demanded of a good to a change in its price. Goods that are considered a necessity by consumers tend to have an inelastic demand. A change in the price of an inelastic good doesn’t bring about a big change in the quantity demanded of the good as consumers need such goods on a daily basis. In the current times, when the pandemic is posing a threat to our well-being, any good or service that provides us protection against the disease will be considered a necessity and hence, will have an inelastic demand. For this reason, face masks have become a necessity good for everyone.

Elasticity of supply is the degree to which producers meet the changing demand for their products. Supply depends on a number of factors like availability of factors of production like labor, land, material, capital, etc. It also depends on the degree of competition. If production depends on an abundant resource to produce a good, the suppliers will face no problem in meeting the increasing demand and vice versa. If the number of competitors is large, the elasticity of supply will be more as consumers will have more options to choose from and prefer a producer offering goods at a relatively lower price. In the case of face masks, suppliers have no scarcity of raw material, which is cloth and strings, to create masks in different shapes and sizes. In fact, many clothing firms have shifted production to face masks to meet the increasing demand and to make a better use of their resources in these trying times. Hence, the elasticity of supply of face masks will be high.