Economics

Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
CASE SCENARIO 1.......................................................................................................................3
1. Definition of demand and supply.............................................................................................3
2. Distinction between shift and movement along the demand function.....................................4
3. Explanation of the case scenario using a diagram...................................................................7
4. Impact on equilibrium price of video conferencing software post the COVID-19 pandemic.8
5. Changes in demand and equilibrium price due to COVID-19 pandemic: A Similar scenario 8
Scenario 2.......................................................................................................................................10
COVID 19 outbreak on The Malta International Airport and Malta.........................................10
Scenario 3.......................................................................................................................................16
COVID 19 outbreak unemployment .........................................................................................16
Scenario 4.......................................................................................................................................19
COVID 19 effect on GDP and Government Deficit .................................................................19
CONCLUSION .............................................................................................................................21
REFERENCES..............................................................................................................................21
Maastricht Treaty, 2020. [Online]. Available Through:................................................................22

INTRODUCTION
Concepts of economic involve various concepts such as law of demand, supply and
different other. IN this report various concepts associated with economics would be projected.
Demand and supply concepts of economics will be discussed. Effects on equilibrium price would
also demonstrate due to covid will also explain. Factors affect demand would also be explained
in this report. Market structure of Air Malta would be evaluated. Features and different aspects
of market would be analysis. Impact of COVID 19 over unemployment would be emphasis in
this report. How the pandemic at global level afftected the unem,ployment rate in country would
also project in this report. Furthermore, this report will also project in what ways COVID could
influence gross domestic product of country.
CASE SCENARIO 1
1. Definition of demand and supply
Demand refers to the amount or quantity of goods and services that consumers are able
and willing to buy at a specific price. When a consumer pays for a unit of a particular service or
good using price, total number of units that are bought at that price is called quantity
demanded. Demand and price are inversely related, which means that a rise in price of goods or
services would decrease demand. Supply is amount of goods and services that a producer or
supplier is willing to manufacture or supply at a specific price. Price is consideration that a
supplier receives in exchange for one unit of a service or good. An increase in price always
leads to a rise in quantity supplied, this direct relation between price (Guiso and et.al., 2017).
2. Distinction between shift and movement along the demand function
Demand function is a description of a relationship between a variable and its
determinants. It determines the quantity of goods that is purchased at particular prices or
alternative values due to change in tastes and preferences of consumers, number of customers,
income level of price of related or complementary goods etc.

For example, there has been a huge surge in the demand of video chat and video
conferencing applications. This scenario will be used to explain the movement of shift of the
demand function graphically, indicated by movement and shift of demand curve.
A movement along the demand curve denotes a change in price as well as quantity
demanded from one point to the snother . This movement is implying that demand relationship is
consistent, and this movement happens when the price of video-calling/conferencing apps
Illustration 1: Growth in Videoconferencing apps
Source: Sarah Perez, 2020

changes and the quantity that is demanded also changes in accordance with original demand
(Dean and et.al., 2020). There is a change in price which is only caused by change in the
demand and vice versa. The red line in the above graph denotes demand curve for video-
calling applications, and assuming that P is the current price for a particular app that is $10 and
current demand is Q, assuming 40 million downloads. When there is a change in price and it
increases to p1= $12 quantity demanded (e1) will decrease to 35 million downloads. The price
here is only cause for reduction in demand.
On the other hand, the shift along the demand function happens when the price of the
good remains constant, i.e., price of videoconferencing and video-chat applications remain
constant, and there is a noticeable change in quantity demanded. This change in demand is
affected by another factor. In present case scenario, Covid-19 pandemic has completely
eliminated casual socializing and office work, due to which most work started happening from
home and people started using video chat apps for interaction. This sudden change in situation
led to a huge increase in worldwide demand of these applications from around $40 million
downloads in February 2020, to above 60 million downloads in March 2020. In this case, there
was no change in price but the quantity demanded still changed. This explains shift in the
demand curve in above graph.

3. Explanation of the case scenario using a diagram
In this graphical illustration, the price of video-calling/conferencing applications have
observed a marginal change or increase but quantity demanded has changed by a huge
percentage. From the graph, it can be seen that increase from P to P1 is less while increase from
Q to Q1 is high. There has been a shift in demand curve. According to statistical facts the
quantity demanded of video chat applications like google hangouts, Zoom, Houseparty,
Microsoft teams etc. have shown a huge surge across US, European Union and UK. The primary
reason is lock-down enforced in countries due to the corona virus pandemic which has
eliminated socializing and people are limited to their houses. This is the reason for sudden
increase in number of downloads of all such applications for either work from home or
interaction purposes (Billingsley, 2020).
S S1
D D1
P1 E1
EE
P
Q Q1
4. Impact on equilibrium price of video conferencing software post the COVID-19 pandemic
From the above presented graph, it can be interpreted that there has been a shift in the
demand curve. The point E on graph denotes equilibrium price which is intersection point of
D and S, i.e. demand and supply of video-calling applications before Covid-19 pandemic. The
equilibrium price is unique price level in which the desires of producers and consumers agree or
the amount of quantity that consumers wish to purchase is equal to the amount that suppliers
wish to sell. The rightward shift in demand curve can be interpreted from D to D1 which means
there has been an increase in quantity demanded of video-calling apps post Covid-19 pandemic
and the new supply increased accordingly as it shifted from S to S1. The new interaction point of

D1 and S1 is E1 which determines the current equilibrium price. Equilibrium denotes a balanced
market which is efficient and balances the quantity supplied and demanded (Glasserman and
Nouri, 2016).
5. Changes in demand and equilibrium price due to COVID-19 pandemic: A Similar scenario
Another similar scenario which has witnessed a change in the demand and equilibrium
price because of the Covid-19 pandemic is increase in the quantity demanded for Hand
Sanitizers. The global Hand Sanitizer market is expected to grow at a rate of 17% during period
of 2020-2025.
The major reason for the change is only restricted to impact of sanitization in the pandemic. The
need to constantly sanitize hands has increased multifold in normal people as well as in the
hospitals. In the initial stages when the demand suddenly rose, the demand was not adequately
met due to shortage in production but after few months the supply met the quantity demanded.
Law of demand & Price equilibrium
Illustration 2: Hand sanitizer market size
Source: KBV research, 2020

The price of hand sanitizer has remained constant before the pandemic started and the
supply and demand both were low and market equilibrium was achieved at point E. But Post
pandemic, there was a sudden increase in quantity demanded and Q changed to Q1 while P
changed marginally to P1. There was a shift in demand curve. The price equilibrium was
achieved after few months post pandemic, and equilibrium was achieved for new demand at
point E1 after the supply was met by S1. The major reasons for growth in quantity demanded
was increase in influence of hand sanitization and health consciousness among normal people
and high demand in hospitals treating corona patients. Multiple variants for alcohol based
sanitizers also started coming out and the ethyl based sanitizer witnessed a tremendous growth
(Thomson and Bullied, 2020).
Scenario 2
COVID 19 outbreak on The Malta International Airport and Malta
Market structure of Malta International Airport and Air Malta
In the recent time more than 6.8 million can travel from either Malta International Airport
or from Air Malta. Before the COVID 19 crisis the market structure of Malta International
Airport and Air Malta was very volatile. In Malta there are total three airports which are
currently operating that effectively cope up with the needs and requirements of Malta as a
country. Before the COVID 19 Outbreak the sales revenue of Malta Airport was approximately
€70.8 million. In the year 2019 the Malta International Airport has registered the record

passengers travelling from the airport was approximately 7310289 in number (Marinescu,
Skandalis and Zhao, 2020). From the Malta Intergenerational Airport 25 different airlines are
operating its business and operate flights to different locations all around the world. It can be
projected that market structure of Malta International Airport was open as flights are departed to
all the major airports all across the globe. Engaged routes of Malta Airport can be projected to
London, Leonardo de vinci Fiumcino and many other such popular airports at a global level. Air
Malta operate total 9 flights from the Malta International Airport and two other locations of
Malta. Air Malta is among the top prioritised airline brand at Malta International Airport. Due to
its native aspect government also promote this airline to attract more passengers travelling from
this airline. Air Malta depart to 39 different locations across the globe. IT can be projected that
company could effective deal with the international traffic in a very systematic manner.
It can be projected that market structure at Malta International Airport is projected as
competitive structure from the above analysis. Monopolistic competition can also be projected as
market structure. Competitive structure can be denoted due to all top airlines across the globe are
operating their business in Malta International Airport. Monopoly can be denoted due to
government support to Air Malta which also support the airline in attracting more passengers at
all its business locations from Malta International Airport. In case of monopoly it can be denoted
as in respect to Malta International Airport and Air Malta there is not pure monopoly can be
addressed as the airline and airport do not cater any specific service that is unavailable at any
other location across the globe. Services are almost similar at all locations but on some ground,
monopoly can be entertained in respect to Air Malta such as the services are luxury in a very
affordable price range and many such services that create a unique impression over passengers
travel from Air Malta Company.
Feature of each market segment
Market segment are denoted as monopolistic competition and oligopoly associated with
Malta International Airport and Air Malta.
Monopolistic competition: Monopolistic market structure is denoted as the market structure
where many companies are engaged in the competition of market. In case of Malta International
Airport and Air Malta many companies are engaged in catering services at the airport. Other
companies like Spice Jet and many other which are catering healthy level of competition to
company (Bauer and Weber, 2020). Products are remarkably similar in context to this market

segment. All companies offer similar range of products as it can be projected that there is not any
major differentiation between the products offer by all companies.
Oligopoly: The Malta International Airport and Air Malta are associated with the oligopoly
market segment. In this market segment only the limited number of companies are involved in
associating business services. Malta International Airport offers numerous airlines abut only in
limited number. Not all international airlines are operating their business at Malta International
Airport. This aspect of the airport associates the airport with the market segment denoted as
oligopoly. In this market segment even the new companies and entity get to establish their
businesses in short run also.
Distinguish two market structure
Point of difference Monopolistic competition Oligopoly market
Definition Monopolistic competition is a
market structure where plenty
of companies offering similar
products and services
competing with each other.
Products offer in this market
segment are similar along with
differentiated from each other
as some companies offer few
different products that attract
buying decision of customers
in market.
Oligopoly market segment is
identified as such market that
contain restricted competition
but similar product range offer
by all companies.
Growth opportunity Growth opportunity in this
market are restricted in a limit
as all companies offering
similar products and also the
price range is almost similar of
all companies.
Growth opportunity in this
market segment is more than
monopolistic competition as
the number of companies
operating the business are
limited in number.
With the support of product

differentiation companies get
to channelise competitive
advantages in market.
Diagram for each market segment
Growth are different in all various market segments. As every market caters its own level
of competition and demand which directly impact over growth of companies. Growth diagram
for different market segment can be stated in the following manner.
Monopolistic competition
(Wolfermann, 2016)
In short run companies take time to get established in case of monopolistic competition.
Number of competitors are heavy that are involved in selling products. Air Malta Company
needs to compete with all different competitors like Spice Jet and many other that caters the
aggressive level. IN short run company might not entertain healthy profitability even in many
cases company require to suffer losses in short run due to healthy level of market competition. In
recent time many companies along with the Air Malta needed to face losses due to COVID 19
crisis all across the globe (Sera, Abafita and Berecha, 2020). The crisis could result into reduced
demand of the airlines and all different public transportation.
Oligopoly market

(Bairoliya and Imrohoroglu, 2020)
Oligopoly market caters limited level of market competition which allow companies to
entertain profitability even in short span of time. This market allows small companies and new
entrants to entertain profits even in the initial time of business. Oligopoly market segment do not
cater aggressive level of market competition due to limited number of companies conducting
business operations in market.
Comparative analysis of two market segments with perfect competition
Both the market segments identified like monopolistic competition and oligopoly market
segment are different from perfect competition. As company carry the power to influence the
entire industry unless like perfectly competition where single entity do not contain power to
influence the industry. Airline industry is also not associated with the perfectly competition
market as only few industries are a part of this market segment.
Scenario 3
COVID 19 outbreak unemployment
Unemployment
Unemployment is defined as when a person not being able to find the job. In case of
unemployment even after having the eligibility and education background individuals not able to
find the job. All such individuals who are not able to find the job are called as unemployed.
COVID 19 impact over unemployment

Unemployment have always been part of society. Over the period of time technology has
become advanced which also causes to unemployment as technology could replace number of
people needed to operate functional activities. In recent time due to COVID 19 businesses did
not operate at same pace which their earlier used to operate due to shut down as a result of lock
down all across the globe. Complete shut down of premises, factor of company did not allow
the organisation to work at same level. All companies required to face economic crisis due to
complete shut down and even after reopening offices World Health Organisation has instructed
the reopening of offices with density of 50% work force are allowed to come to office (Gouder
and Scicluna, 2018). All the impact of COVID 19 could lead to more unemployment
Unemployment are further segregated into two parts one is equilibrium and the second one is
denoted as disequilibrium. Both types of unemployment carries different characteristics which
can be analysed in following points. COVID 19 pandemic has affected both types of
unemployment equilibrium and disequilibrium unemployment. The pandemic could hit to both
types of unemployment due to economic crisis all across the globe.
Equilibrium unemployment
(Harwood and et.al.,2020)
Equilibrium unemployment is a kind of unemployment where people get lesser than what
they actually deserve. In this type of unemployment even after having a job employee don't feel
like getting being employed due to lesser salary payments. Causes identified behind equilibrium
unemployment can be stated as frictional unemployment, structural unemployment,
technological, regional and seasonal unemployment. COVID 19 crisis could improve the
equilibrium unemployment in respect to structural unemployment and regional unemployment
consisted with the equilibrium form of unemployment. The pandemic could negatively impact

the businesses at global level due to complete shut down, restrictions opposed by government
and many other reasons. All this crisis could support company in taking unethical advantages in
form of reducing salaries of existing employees and also in other manner such as not allowing
promotions, incentives, salary hikes and all the economic benefits employees get to entertain in
normal business situation.
Disequilibrium unemployment
(Ferreira and Dionísio, 2016)
Disequilibrium unemployment is a type of unemployment in which due to government
rules and opposition of any law or act like minimum wage law high demand of jobs addressed in
market. People starts attracting towards applying for job in industry. Factors like real wage
unemployment, growth in labour supply unemployment and cyclical factors that contribute in
this form of unemployment. COVID 19 crisis could contribute in increase in labour supply
without increasing demand as many employees became job less after this crisis (Janković, 2018).
Many peoples get to resign from the existing jobs as companies facing economic crisis due to
lock down.
It can be analysed that COVID 19 crisis could contribute in form of nonequilibrium
unemployment rate more aggressively as comparison to disequilibrium unemployment all across
the globe.
Measure implements by government to reduce unemployment
Government in Malta has taken different measures that could allow the government to
deal against both types of unemployment increased due to COVID 19 pandemic.

 Government started allotting € 800 per month to all full-time employees recruited at
different companies part of Malta.
 In case of part-time employees government started allocating € 500 to such people so that
they can deal with reduced salaries and pays (Eddy and Cork, 2016).
 In case of businesses fall under the Annex A category the wage supplement would
allocate € 600 per month to full-time employees and € 375 per month to part-time
employees part of such companies.
 All such people who could lose their jobs due to COVID 19 are getting € 800 per month
as an incentives and to part-time employees the benefit is restricted to € 500.
 Medical benefits are also allocated worth € 800 in case of full time and € 500 in case of
part-time employees to all such people who had employment in private sector
organisation. People covered under this category are denoted as all such individuals who
are not able to work from home in the pandemic and suffering from the wage cut base on
loss of pay.
 All such peoples who are involved in tele working sector are getting € 4000 as a grant
capped at € 500 per tele working agreement.
 Rent subsidies are also allocated to people of Malta by the government. This subsidy will
involve 50% of the rent of individual but shall not exceed worth € 25000.
 Government has also taken step to grant free e learning to workforce part of tourism
sector.
The above mentioned advantages are allocated by government to deal effectively against
the equilibrium and disequilibrium form of unemployment occurred due to COVID 19 crisis. All
those benefits and grants are the key benefits government has given to the people who had been a
part of some kind of employment and suffered in form of resignation or salary cut.
Scenario 4
COVID 19 effect on GDP and Government Deficit
Gross Domestic Product
Gross domestic product is defined as the final value of all the finished goods produced in
a respective financial year. This involve all goods and services and the sum of such finished
products produced by company. Gross domestic product is measured with the support of three

different methods identified as national output, expenditure method and income method. Value
of gross domestic products would be different in all the above mentioned three methods.
Reason for declining Malta's economy post covid as per expenditure method
Expenditure method involve expenditure of people on consumptions, investment
expenditure, government expenditure and net export of country as a sum while calculating gross
domestic products of country. Post COVID 19 pandemic consumer spending over meeting its
need also reduced due to job loss or other issues like salary loss, government also initiated to
take care of basic needs of people in society which also makes them directed towards reducing
the amount of investment in enhancing capital value and also post crisis time restricted export
of Malta (Debono, 2020). All these reasons became the causes behind the lower GDP growth
rate or decline in the gross domestic products of Malta.
Former is more realistic measure than other measure
GDP is denoted the economic activity of country. In a respective financial year what
amount of products country has produced is denoted as country's gross domestic product. Gross
domestic product of country can further calculate with support of two different methodologies
one is real and other one is nominal. Nominal is also calculated same way real GDP is
calculated just a one point in difference between real and nominal is that nominal also involve
impact of inflation over the prices used to measure total value of gross domestic product of
country. Impacts create by inflation in country also influences the value of GDP in negative
manner. For example, in case the inflation in economy is increasing it would reduces value of
gross domestic product of country based on the concepts of nominal GDP and in case inflation
in economy is reduced it would low the value of GDP of country (Vlachos and Bitzenis, 2019). It
can be stated that there is not any specific measure to calculate the rate of inflation economy is
suffering from. The rate is all hypothetical in nature as there can't be any specific rate can be
measure by economist that can denote the exact amount of inflation country is suffering at this
point of time. Due to inefficiency in measuring actual amount of inflation economy is suffering
the real GDP finds more reliable for economist as compare to the concept of nominal. Majority
of economist likes to favour concept of real GDP in order to measure the total value of
country's gross domestic product rather than following the method call as nominal GDP.
Malta government deficit
Year Malta Government Deficit Malta Government Debt

as a % of GDP as a % of GDP
2016 1 55.45
2017 3.3 50.21
2018 1.9 45.37
2019 .5 42.46
Comparative analysis of European Union Maastricht Criteria
The Malta government has followed the guidance given by European Union in respect to
its deficit and debt to GDP ratio. The treaty specified that government budget deficit must not
exceed 3% in any of financial year. Except 2017 Malta as a country did not exceed the rate as a
deficit. In 2016, 2018 and 2019 government could cope up with the regulations of 3%. In context
to debt to GDP ratio the standard mark is 60% based on Euro convergence criteria which also
not exceed in any of financial year stated above (ANDINS and HUDENKO, 2017). The
guidelines is followed by government and maintained standard rate in both the aspects of
economics.
CONCLUSION
It can be concluded that demand and supply are interrelated to each other. In case the
demand of product is increased it would further increase the supply. Market structure at Air
Malta and Malta International Airport is denoted as monopolistic competition and oligopoly.
Perfect competition market never exists as per economics. COVID 19 outbreak has badly
affected the employment all across the globe. New graduates are not getting jobs and all such
people who already had jobs are also suffering in form of Equilibrium & disequilibrium
unemployment. Different incentives and benefits like rent allowances and many such benefits are
granted by government in Malta to deal against both types of unemployment. Gross domestic
product is a sum of all products manufactured or developed by country. GDP are further
differentiated into real and nominal. As per Euro convergence criteria government budget deficit
must not exceed 3% in any of the financial year and also the debt to GDP ratio must not exceed
60% in any of the financial year.

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