Impact of COVID-19 on Demand and Equilibrium Price of Video Conferencing Software

This article discusses the impact of COVID-19 on the demand and equilibrium price of video conferencing software. It explains the concept of demand and supply, using the example of video conferencing software. It also explores the increase in demand for video conferencing software due to the COVID-19 pandemic and its effects on the equilibrium price. Additionally, it discusses the market structures of the Malta International Airport and Air Malta, unemployment due to COVID-19, and the effect on GDP and government deficit.

Economics

INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Scenario 1........................................................................................................................................3
1. Define demand and supply......................................................................................................3
2. Use the example of video conferencing software to distinguish between a movement along
and a shift of the demand function..............................................................................................4
3. Video conferencing software and video chat applications have seen a huge surge in demand
as a result of the COVID-19 pandemic........................................................................................5
4. Explain the main effects on the equilibrium price of video conferencing software following
the COVID-19 pandemic.............................................................................................................7
5. Identify and explain by the use of diagram/s another scenario which experienced changes in
demand and consequently equilibrium price due to COVID-19 pandemic.................................8
Scenario 2........................................................................................................................................9
1. Identify the market structures which the Malta International Airport and Air malta operate
in..................................................................................................................................................9
2. Explaining the features of each market structure....................................................................9
3. Distinguish between the two market structures.....................................................................10
4. Indicating the type of profits gained in the short run.............................................................10
5. Compare these two market structures to perfect competition...............................................11
Scenario 3......................................................................................................................................11
1. By using local references define the term ‘Unemployed’.....................................................11
2. The COVID-19 pandemic led to an increase in unemployment. Explain whether this was an
increase in Equilibrium or Disequilibrium Unemployment......................................................11
3. Present a diagram for each of the two types of unemployment.............................................12
4. Explain TWO main measures implemented by government in order to reduce the type of
unemployment...........................................................................................................................13
Scenario 4......................................................................................................................................14
1. Define ‘Gross Domestic Product’..........................................................................................14
2. By referring to the expenditure method of measuring Gross Domestic Product, explain the
main reasons for a decline in Malta’s economic growth rate following COVID-19.................14
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3. Distinguish this measure with the nominal Gross Domestic Product and explain why the
former is a more realistic measure than the other measure.......................................................15
4. Comment on the trends of each of the Malta government deficit and government debt over
the years.....................................................................................................................................15
5. Explain how this abides to the European Union Maastricht Criteria....................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
2

INTRODUCTION
Economics is the social science concept which is important for the production, supply and
consumption of products and services (Alesina, Harnoss and Rapoport, 2016). It investigates
how people, corporations, states, and countries make decisions on how to distribute or allocate
resources. Economics is a field of how communities use limited resources to generate and
allocate valuable goods among different individuals. Economics is, in reality, a significant topic
because of shortages and the need for productivity. This assessment based on the fore scenario
which is about the raise of teleconferencing pressure due to distance separation, result of
pandemic on ‘The Malta International Airport and Air Malta. In addition, remaining part is
about unemployment due to COVID-19 and effect on GDP and government deficit.
MAIN BODY
Scenario 1
1. Define demand and supply
In an economic terms, Demand and Supply depends on the number of unites of good that
manufacturers want to offer at dissimilar cost and the number of units which the purchasers
want to obtain (Inglehart, 2020). This is a primary representation of pricing worn in modern
economics. The cost of the product is dominated by the economic interaction of requirement and
offering. The corresponding price is referred to it as the fair price and constitutes an arrangement
among sellers and the buyers of the commodity. In balance, the number of units, products offered
by the producer is similar to the number of units requested by end user. Below mentioned
Demand and Supply graph provide understanding:
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Figure 1 Supply and Demand, 2019
From the above graph, it has been analysed that where demand and supply curve
intersect, which is called market equilibrium. It plays the role of a market to balance demand and
supply by means of a price system. If the purchaser wants to buy more of products than is
accessible at the prevailing market price, the consumer may prefer to bid up the price. If they
plan to buy far less than what accessible at the price determined, suppliers may offer lower
prices. There is also a tendency to shift towards the price of balance. This trend is recognized as
a market system, and the ensuing equilibrium among supply and demand is considered a market
balance.
2. Use the example of video conferencing software to distinguish between a movement along and
a shift of the demand function
In relation to video conferencing software, Zoom meeting is one of the highly demanded
conferencing and meeting software which helps in maintaining social distancing. Zoom software,
which enables users to chat with other 99 people at the same time, it has appeared at the top of
the device with the software always running the download chart throughout the Apple app store
or Android (Baker, Bloom and Davis, 2016). The company does not even have regular download
estimates, but app monitoring organization named Apptopia said the application zoom were
installed for 2.13 million rounds worldwide on March 23,when the lockout were revealed in UK
and its demand higher coming from 56,000 60 days ago..
The application was used to manage virtual schools, religious ceremonies and even dating
websites and stag dos. It provides a free call edition of less than 40 minutes. But that is the field
of big business, where the Zoom was designed, that gives almost all of the revenue. Corporate
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licences for large corporations cost £ 15.99 a month per host (requiring a minimum of 50 hosts).
The company announced an 85 per cent rise in sales to $166.6 m (£132 m) in the 3 months
leading up till the end of October, with the recent report statistics available.
Below mentioned graph provide better understanding regarding change in the demand of
Zoon Meeting Application:
Figure 2 Movement in Demand, 2020
From the above demand curve, it has been observed that demand of an Zoom meeting
software increases all around the world due to COVID-19 lockdown. Above graph shows that
increase in the demanded quantity from 60 to 80 quantity then price of demanded quality
decreases from $ 16 to $ 12. Demand and supply has adverse relationship where, when price
increases than demanded quantity also reduces and vice-versa.
3. Teleconferencing application and stram applications were identified as a big rush in
requirement as the consequences of the Coronavirus pandemic 2019.
Home-based work policy, social distances and worldwide lockdowns have boosted demand
for video conferencing or chatting applications for both personal and business use. As per a new
study from App Annie, business video conference apps were witnessing record development on
Monday, and only reached their largest week ever in March, when 62 million updates were
uploaded the week of March 14-21. Meanwhile, the House-party social media video app is also
seeing remarkable development in Europe throughout lockdowns and residential quarantines.
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For example, the spike in business application downloads to 62 million over iOS and Google
Play early in March was up 45 percent from just the previous week. This was also the fastest
increase in any classification throughout app stores during the week, the research said. It was 90
percent higher than the daily average of business mobile apps downloads in 2019.
Zoom Video Conferencing application topped the charts globally in February and March,
and appears seeing a high millions of downloads in the U.S., U.K. And in other parts of Europe
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(Becker, 2017). Mostly during high week of downloads, Zoom was installed 14 times weekly
average in the U.S. in the 4th quarter of 2019. This was also installed more than 20 times average
weekly Q4 in the United Kingdom, 22 times times the average in France, 17 times the level in
Germany, 27 times the average in Spain and 55 times the average in Italy.
A similar study from the Sensor Tower app store analytics company saw Zoom 's U.S.
downloads marginally higher in mid-March, but noticed that the word "Zoom" isn't the top 100
search engine in the U.S. App Store before a week of March 9th. That indicated that several new
users had sent download page of the app directly such as a connexion shared in an email account,
a calendar prompt, or an intranet location, perhaps.
4. Explain the main effects on the equilibrium price of video conferencing software following the
COVID-19 pandemic
It is predicted that the global video conferencing market will gain momentum during the
coronavirus crisis. The organizations along with the administration representatives consider
teleconferencing to be the most feasible alternate to interrelate the distant workers, customers
together with the staff, while at the same moment keeping away the straight interaction with
citizens.
Presence of several elements that have been influenced market growth and equilibrium
price in the recent years, such as the growing focus of corporations on expanding their businesses
on the international hawk and on governing the employees in different divisions. But the
pandemic outbreak has had a constructive effect on the teleconferencing business. The
movement ban restricted the outstretch of firms. In an international market, which in turn
expanded the usage of video conferencing apps. At this time, businesses are engaged in a
creative hiring process by conference calls.
A rise in demand and a low supply can result in an increase in price of equilibrium;
however the impact on the quantity of balance could not be detained (Broadberry and et.al.,
2015). Consumers now put a higher demand on the product for every amount, and manufacturers
must have a premium price in order to achieve the goods; thus, the price would rise. In case of
video conferencing application, demand and supply matched because higher the demand can
easily fulfil and customers can download application anytime from play stores.
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5. Identify and explain by the use of diagram/s another scenario which experienced changes in
demand and consequently equilibrium price due to COVID-19 pandemic
As a consequence of this unparalleled demand for video conferencing applications like
Skype, Zoom, Google Classroom, Google Hangouts, Telegram, WhatsApp, and other virtual
meeting and virtual conferencing apps are also the top apps in the Play Store and App Store.
The rise in the number of downloading applications for video conferencing, whereas the
outbreak of COVID-19, is together for a longer period of time. As an empirical reality, this has
contributed to a range of new entrants in the market.
Above discussed graph shows that demand of Video Conferencing Application
continuously increases due to COVID-19 spread and shutdown of schools, offices and other
workplace with the rival companies, any action taken by the oligopoly firm is observed by its
competitors (Burke, Hsiang and Miguel, 2015). In US, Hangouts meet is more popular among
the all video conferencing application and in UK, Hangouts meet and Zoom meeting software is
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popular. In addition, in France and Germany House-party is more popular among all the
application.
Scenario 2
1. Identify the market structures which the Malta International Airport and Air malta operate in
Malta International Airport and Air Malta both are aviation sector organization and they
are operating in Oligopoly market structure. The airline industry is characterised by an
oligopolistic market structure, a type of imperfectly competitive markets where a small number
of firms control the business. Oligopoly companies have market control to set or adjust prices for
their goods by setting different levels of production. Since oligopoly companies generate
identical outputs and interact (Carleton and Hsiang, 2016). As a consequence, rivals may respond
with cost-cutting or other effort to raise market share. Thus, companies in the oligopoly are
interrelated and each acknowledges that their market power is susceptible to loss by rivals or
new entrants. The higher the HHI (Herfindahl – Hirschman Index) increasing the intensity of the
industry. For example, if there is only one company in the industry, the HHI would be 10,000.
2. Explaining the features of each market shape
Features Monopoly Oligopoly Monopolistic
Competition
Perfect
Competition
Number of
Firm
In this market
structure, there are
only one firm.
There are few
firms which
compete with
each other.
Large numbers
of organizations
are in this market
structure.
Very Large
numbers of firms
are in this market
structure.
Firm Size A very Large size
organization has
monopoly power.
In oligopoly, few
large size firms
included.
This market
structure
includes the
medium size
firms.
Firm size in this
market structure
is small.
Nature of
products
There are no
substitute products
available.
Differentiated
products with
rivals.
Differentiated
products in the
market.
Standardized
products and
buyers have
several options.
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Entry
Barriers
In this market
structure, entry
barrier is very high.
Very High entry
barriers.
Entry barrier is
low.
In this market
structure, there
are no entry
barriers.
3. Distinguish between the two market structures
In recent years, the introduction of low-cost flight tickets has driven the aviation industry
that was probably an oligopoly, towards monopolistic competition. Such as the airline industry,
almost all other sectors do not explicitly fall into one of 4 traditional market structure categories.
There are some characteristics which show the difference between Oligopoly and Monopolistic
market structure in respect of Aviation industry:
Numerous or Less Firms: The main distinction among oligopoly and monopoly war is the
parallel strength and place of sell and buy dominate every company depending on the amount of
rivals. However, there really is no simple distinction made in between two business systems. It
cannot be assumed that certain 50 companies are a dividing line, so that 50 companies
constructed an oligopoly and 51 formed monopoly war.. One of the industry with just 3
companies is obviously oligopoly, combined with different industry with 30,000 companies
definitely monopoly war, the composition of industry with thirty or three hundred companies
may be not obvious.
Entry Restrictions: It is a crucial distinction among oligopoly and monopoly rivalry. The
restriction to oligopoly are strong. The barricade to monopoly competition were poor. Although,
the bar to entry was a situation of perspective. A need for government authorisation is one
important obstacle that can establish oligopoly, particularly if only a few firms are allowed to
enter. However, monopolistic rivalry may also be created if a greater number of people are
allowed to participate (Falk and et.al., 2018). Additional barrier, including establishment expense
and power of money, generally hampers the entrance to different stages, contributing to besides
oligopolistic or monopoly war. Moreover, the restrictions of introduction may shift extra,
converting oligopoly into monopoly war or its reciprocal.
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4. Indicating the type of profits gained in the short run
In context of different market structure, each market structure gain different profit in short
run. Further discussions are as follow:
Perfect competition: In context of this market structure, organizations gain profit in short
run which helps them to survive. There is huge competition and every one earned nominal profit.
Oligopoly: In this market structure, firms gain profit in short run as well because there are
only few firms in the market and buyers does not have much options.
Monopoly: There is only one seller so people do not have any other option to buy or
consume service from others. In short run organizations gain the profit.
Monopolistic Competition: Firms who operated in monopolistic competition also
generate profit in short run and there are many firms with interdependent pricing.
5. Compare these two market structures to perfect competition
Oligopoly and Monopolistic market structure already discussed above in this report where
monopolistic market has many firms but less than perfect competition market (Goodchild, Nargis
and d'Espaignet, 2018). In oligopoly market, there are very high barrier to enter but in perfect
competition there are no barriers to enter and exit from market.
On the other side, every market again profit in short run but in long run perfect and
monopolistic competition unable to generate profit. Demand curve of perfect competition market
is perfectly elastic; in monopolistic market demand is very elastic but not perfect due to close
substitute available. In context of Oligopoly market, demand is inelastic in order to be effective
oligopoly.
Scenario 3
1. By using local references define the term ‘Unemployed’
Unemployed means that they do not have a paying job and are not employed. A individual
who is identified as unemployed is generally out of work and searching for a job (Jones, 2016).
Unemployment seems to be the fact of being unemployed and Jobs is the reverse. There have
been three major forms of unemployment are cyclical, systemic and frictional.
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2. The COVID-19 pandemic led to an increase in unemployment. Explain whether this was an
increase in Equilibrium or Disequilibrium Unemployment
Unemployment rates also reached a critical point worldwide as the consequences of the
global rampant. The effect of the pandemic on employment is 10 times greater than those in the
international monetary disaster of the year 2008. Given the job retention programmes and
unemployment insurance provided by governments, the jobless rate is not projected to rebound
until after 2021.
Covid-19 pandemic is contributing to a decline in economic growth and an increase in
unemployment that is projected to hit 12% worldwide and 10% for OECD countries over the
period of 2020. Job retention programmes have not been effective in Canada as they have not
been implemented by companies. They added that seasonal layoffs were transforming into
permanent layoffs, leading in a rise in the unemployment rate and a drop in earnings. Current
economic situations show the Disequilibrium Unemployment due to COVID-19 pandemic.
Higher the people unemployed and jobs are low. Basically there are two types of unemployment
which are discussed.
Symmetric Unemployment: It refers to gap among who wishes to labour to who are
ready and competent to grab the employment opportunity at the present fare of pay. If they have
the current wage rate, therefore those who want to labour and who are ready and competent to
accept the employment offers. Difference in both of them is the degree of unemployment.
Disequilibrium Unemployment: This is unemployment based on the grounds that perhaps
the actual pay range is beyond its level of balance. The optimum wage rate, where the amount of
total demand for labours is equivalent to the total numbered of labour supply.
3. Present a diagram for each of the two types of unemployment
Equilibrium Unemployment: The current wage rate is that, as in diagram 1 above, those
that want to work are described by point F, and those that are ready and willing to take up job
offers are expressed by point E. The gap Qf-Qe is the degree of unemployment. At a minimum
wage level of w1, as seen in diagram 1, equilibrated unemployment is Qc-Qb and imbalanced
unemployment is Qb-Qa.
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Disequilibrium Unemployment: This is unemployment based on the fact that perhaps the
actual real wage rate is above its level of equilibrium (Jorgenson, Gollop and Fraumeni, 2016).
The optimum wage rate of amount of total demand on all sectors for labour (DL) is equivalent to
the total of supply of labour (SL). The SL indicates the number of people in the workforce who
are ready and able to work at any rate of pay. The SL is rising as the higher real wage rate
induces people who did not wish to work before returning to the workforce like housemakers,
and unemployed people who are in between jobs, to accept job offers. DL, on the other hand,
indicates the number of employees that companies are willing and able to recruit at each pay
rate. This demand curve is decreasing as real wage rates increase, and businesses would have
incentives to replace labour with other sources of output, such as machinery.
If the pay rate is increased to W1 for certain reasons, such as the imposition of a minimum
wage rule or effective union demand, then QB (number of workers affiliated with point B)
people also are willing to take unskilled business, but companies are still willing to employ up to
QA people (amount of workers associated with point A). As a result, QB-QA number of people
will be unemployed. This kind of unemployment is considered real-wage unemployment. Real-
wage unemployment is induced by real wages being pushed above the level of market balance.
4. Explain TWO main measures implemented by government in order to reduce the type of
unemployment
Fiscal Policy: It will minimise the jobless by contributing to boost mass requirement and
country's prosperity (Kahn, 2019). The jurisdiction would require to follow a budgetary stimulus
strategy, which includes lowering taxes or increase public expenses. Less duty raise usable fund
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(e.g. Value Added Tax reduced to 15 percent in the year 2008) which helps in rise in utilization,
contributing to bigger mass demand (Aggregate Demand). With sucha rise in Aggregate
demand, it would be a growth in current (as much because space is available in the country). If
companies manufactures at large, then it would be a hike in requirement for jobs, as a result,
lesser work-inferior idle employees. Along with stronger mass requirement and solid country
prosperity, lesser companies would be insolvent, resulting in less work sacrifise.
Financial Strategy: One-sided approach will entail lower dividends. Low cos minimises
lending costs and enable consumer spending. This rises Aggregate Demand and can will also
support in raising Gross Domestic Product and minimise need scare labour. Less lending rate
would also lower the trade price and increase international trade attractivenes. In certain
situations, low trade rates could prove insufficient to high requirement. Central banks can, in this
situation, can consult to monetary stimulus. It is the effort to rise the offerings of money and
raise mass requirement.
Scenario 4
1. Define ‘Gross Domestic Product’
Gross domestic product (GDP) is the comprehensive capital or customer merit of all the
final products and amenities generated internally in nation's territory for a specific time. As a
wide indicator of total country's output, it serves as a detailed result for the nations well-being of
a specific empire..
2. By referring to the expenditure method of measuring Gross Domestic Product, explain the
main reasons for a decline in Malta’s economic growth rate following COVID-19
The expenditure method is the best appropriate applied tool for determining Gross
Domestic Product, that would be a computation of the performance of the nation generated
inside the nation's territory, anyway about one who controls the factors of production (Mutz,
2018). The Gross Domestic Product under the discussed framework is computed by calculating
all the expenses on finished products and amenities. There are many major big expenses for the
calculation of GDP such as household consumption, business spending, government expenditure
on products and amenities, and outgoing products equal to imports out of exports on products
and services.
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Formula:
GDP =C + I + G + (X − M)
Where:
C = Consumer spending on goods and services
I = Investor spending on business capital goods
G = Government spending on public goods and services
X = Exports
M = Imports
Malta’s economy will be seriously impacted by this year's pandemic of COVID-19. GDP
is projected to contract by about 5¾% per cent but is expected to make a full by 6.0 per cent in
2021. Since 26 March, the lock-up and closing of non-essential enterprises has been a burden on
personal spending and service exports, with restricted space for leisure or food service
expenditure. However, the initial tightening of the labour market and the high saving rate of
households could cushion the impact of the incident on demand. Some large-scale healthcare and
infrastructure investment projects are ongoing, although other proposals have been delayed.
3. Distinguish this measure with the nominal Gross Domestic Product and explain why the
former is a more realistic measure than the other measure
Nominal GDP is a macro-economic measurement of the manufacturing of products and
services at existing prices. The key difference among nominal Gross Domestic Product and
actual is hike change. Since nominal Gross Domestic Product is analysed on the grounds of
prevailing prices, no hike modification is required.
A measurement of center distribution is the only utility that looks for distinguishing the
data set by indicating the middle character inside the same data place (Nikaido, 2016) (North,
2016). As being such, analysis of inter medial tendency is generally referred as a measures of
middle arrangement. These are generally refred as statistical analysis. The mean (often referred
to as the average) is most probably the indicator of the middle trend that they are mostly familiar
with, but the presence of many variants, including the median and the mode. The mean, the
median and mode all are dependable measures of the concept, but inside various situations some
middle arrangements are much appropriate than distinct. Throughout the following sections, they
will analyse at mean, median and mode and master as how and when to measure them and in
what situations they proves best suited for use.
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4. Comment on the trends of each of the Malta government deficit and government debt over the
years
Year Malta Government Deficit
as a % of GDP
Malta Government Debt
as a % of GDP
2016 1.00% 55.5%
2017 3.30% 50.3%
2018 1.90% 45.6%
2019 0.50% 43.1%
From the above table, it has been observed that government deficit in % form decreases
throughout the period of 2016 to 2019. Similarly, debt of Malta’s government as a % of GDP
also reduces from 55.5% in 2016 to43.1% in 2019.
5. Explain how this abides to the European Union Maastricht Criteria
For Malta, the biggest issues were ever to control rising inflation and to put its public debt in
accordance with the Maastricht criteria in a sustainable way (Wiersema and León, 2016). At
most several months since Malta's eu succession in the year May 2004, EU finance
administrations initiated the pretended expansionary monetary process, called on Malta to
decrease its general loss to 3 % of GDP, the top sealed by the Maastricht Treaty.
The rate of inflation in Malta and during one year to year 2007 March, it was 2.2 percent
under the nominal value of 3.0 percent. Throughout the coming months, it is expected to stay
below the reference value. Although improving stable prices is focused on concept of
fundamentals, Malta requires to remain observant and curb higher inflation danger as recurring
things builds on.
CONCLUSION
From above discussion it has been observed that current business environment is affected
due to COVID-19 which further affects the worldwide economy. Entire economy faces the
financial crises and because of this people of country also suffer a lot. Most of the people lose
their jobs and unemployment will be continuing until 2021.
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