Question

In: Economics

In Italy, COVID-19 special commissioner Domenico Arcuri announced that surgical face masks must be sold at...

In Italy, COVID-19 special commissioner Domenico Arcuri announced that surgical face masks must be sold at no more than 50 European cents (76 cents CAD) plus tax. 2 What short-term impacts do you expect this will have on the market for surgical masks in Italy.

Solutions

Expert Solution

In the diagram, you can see the market for masks. D and S are the demand and supply for masks in an economy at a given point in time. Their point of intersection E is the equilibrium with Equilibrium price P and equilibrium quantity Q. When the government announces the maximum price at which masks can be sold (i.e 50 cents in this case) they impose a Price Ceiling. A price ceiling essentially means the maximum price set by the government beyond which the sellers cannot sell the commodity.

Price ceilings are usually imposed on essential goods which without government intervention will be sold at higher prices and would not be affordable. In the figure the Price ceiling is set below the equilibrium price to make it affordable for the masses.

Due to the price ceiling the equilibrium where qty demanded and qty supply are equal is disturbed. Qty demanded increases from Q to Qd whereas qty supplied decreases from Q to Qs. This means qty demanded is greater than qty supplied and this creates a shortage in the market of masks. Therefore the short term impact of this policy can be a shortage of surgical masks as their demand will exceed the supply (due to the price ceiling imposed)


Related Solutions

stylish face masks vs surgical face masks essay
stylish face masks vs surgical face masks essay
Sing Mask is a local enterprise that manufactures surgical face masks that are sold locally as...
Sing Mask is a local enterprise that manufactures surgical face masks that are sold locally as well as exported to the region. Due to a forecasted surge in demand for the next 3 years, Sing Mask decides to make its operations non-stop with a production line that runs 24 hours a day and everyday throughout the whole year, including public holidays. Now is the last week of December and you are the Operations Manager overseeing manpower planning. Sing Mask’s Sales...
Perform a SWOT analysis for a new Canadian company producing surgical masks during the COVID-19 pandemic.
Perform a SWOT analysis for a new Canadian company producing surgical masks during the COVID-19 pandemic.
Consider the market for face masks. When COVID-19 lockdowns started in March, healthcare workers and the...
Consider the market for face masks. When COVID-19 lockdowns started in March, healthcare workers and the general public complained about a lack of face masks. 2 Now, however, several months later, there is no significant lack of face masks, and the govern- ment mandates the wearing of facial protection in public indoor settings. Using a supply and demand diagram, explain how this initial shortage of face masks rectified itself. (Hint: the transition to a new equilibrium
In the wake of the Covid-19 pandemic, Honeywell Inc. has orders for 1000 face masks from...
In the wake of the Covid-19 pandemic, Honeywell Inc. has orders for 1000 face masks from Richardson and 800 face masks from Plano. Honeywell Inc. has 1200 masks ready in a Frisco facility and 1000 masks in an Irving facility. It costs $10 to ship a mask from Frisco to Richardson, and $7 to ship it from Frisco to Plano. It costs $9 to ship a mask from Irving to Richardson and $12 to ship it from Irving to Plano....
Depreciation Combat Covid-19 Ltd was established to produce disposal protective masks and face shields which are...
Depreciation Combat Covid-19 Ltd was established to produce disposal protective masks and face shields which are in high demand. The company bought an Ultrasonic Machine at a purchase price of GH₵50,000; transportation charges GH₵3,000; Purchase commission GH₵1,000; and Installation and testing GH₵3,600. The Ultrasonic Machine produces 80 pieces per minute. It works 24 hour per day for five-day week and uses 2 days for maintenance and repairs. The machine will be used for 20 weeks after which it will be...
5.Consider the market for face masks. When COVID-19 lockdowns started in March, healthcare workers and the...
5.Consider the market for face masks. When COVID-19 lockdowns started in March, healthcare workers and the general public complained about a lack of face masks.2Now, however, several months later, there is no significant lack of face masks, and the government mandates the wearing of facial protection in public indoor settings. Using a supply and demand diagram, explain how this initial shortage of face masks rectified itself. (Hint: the transition to a new equilibrium)(15%)
Khan Inc. is a small manufacturer of face masks. Last year, 50,000 masks were sold for...
Khan Inc. is a small manufacturer of face masks. Last year, 50,000 masks were sold for $20 each. The income statement is as follows: Sales 1,000,000 Less variable cost    400,000 Less fixed cost    200,000 EBIT    400,000 Less interest               125,000 EBT    275,000 Less tax 40%    110,000 EAT          165,000 EPS (100,000 shares)          1.65 Find DOL, DFL and degree of total leverage. If sales increase by 5% what effect will it have on the EPS?
You are planning to sell a range of fashionable surgical face masks. Evaluate the processes you...
You are planning to sell a range of fashionable surgical face masks. Evaluate the processes you plan to use to develop your new product proposition. (20 marks)
You are planning to sell a range of fashionable surgical face masks. Evaluate the processes you...
You are planning to sell a range of fashionable surgical face masks. Evaluate the processes you plan to use to develop your new product proposition. (20 marks)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT