Shortage of Face Masks: Demand and Supply Analysis

Assessment-1
Economics
Question 1:

Answer:
During COVID-19 pandemic, the prices of new Toyota motor vehicle increased. The
major reason behind rise in sales was the risk of infection which people might get if
they use public transport. Another reason for the same was to offset the substantial
increase in the input costs of the cars. The company believed that during the
pandemic, it has reflected only a minimum portion of costs onto their prices as it has
absorbed the cost increases through its internal efforts.
New car market
New cars have significant growth during the time of pandemic. Toyota, offers many
electric and hybrid vehicles than any other brand and that too on various price ranges.
During pandemic people preferred to have their own cars instead of using public
transport. The company’s costs more upfront than the gas powered vehicles. These
vehicles demanded less maintenance as compared to used cars. People prefer buying
new cars as they did not had to put any additional costs such as depreciation on
vehicle. One of reason was eco-friendly approach as these cars are more environment
friendly and provided zero-emission performances.
Interpretation:
Even though the prices increased, significant growth in the demand of cars was
noticed. The curve shifted rightward as the prices increased influencing the demand to
also increase.
Demand
P2
Price
D2
P1
D1

Second hand car market
Second hand market of these types of motor vehicle have shown growth during the
times of pandemic due to many reasons. People had lost jobs during the time which
have left them with lower purchasing powers. Because of the impacts of COVID-19
on income, automobile industry have had a big hit. However, this led to increase in
the demand of used cars. The middle class and upper middle class segment of
population is price conscious. Buying a new car is a lengthy and costly process. Used
cars have provided the customers a wide choice of brands to choose from.
P1
P2
Interpretation: When the prices of used cars went down from P1 to P2, the demand
curve shifted from D1 to D2. It states that lower prices of second hand car lead to
increase in the demand of second hand car market.
Question 2:
Answer:
Air travel or aviation emissions are significant contributor to the global climate
changes. Government have identified carbon pricing as a key policy mechanism to
reduce green-house gas emissions. This policy requires the emitters to be accountable
financially for the environmental cost of emissions. This means the carbon pricing or
carbon tax policy is exhibited in the decreased travel demand. Effective carbon tax
Demand D2D1
Price

rates will deduce aviation emissions through increasing prices of air travel, therefore
decreasing demand.
If the passengers have to pay higher prices for air tickets due to carbon tax, the
common reaction will be reduced demand of air travel. Upper class population will
have no impact but middle class and upper middle will have higher impacts because
of their low disposable incomes. They will prefer other modes of transportation rather
than air travel.
Higher tax prices can reduce the amount of air travel as higher prices will lead to low
demand. Air travel depends upon the price elasticity of demand. The elasticity of air
travel as demand is elastic. It means if the prices of air ticket are lo, its demand will
increase and more people will be buying it. On the contrary, if the prices of air travel
increase people will shift to other modes of transport and which will ultimately reduce
the demand of air travel.
Interpretation: When the prices where P1 the demand was Q1 and when the prices fell the
demand increased to Q2. The curve shows direct relationship between the price and demand
which means the demand and prices of air travel are elastic.
Question 3:
Answer:
(a) Vaccine rollout plans in Australia involve the federal government has started providing
COVID-19 vaccination free to everyone living in Australia. Like any other country people
living in Australia does not need a prescription to receive it. The vaccine methods were
highly equitable and fair as it was available to everyone free of cost. The country, rolled out
P2
P1
Q2Q1
Price
Quantity
Demand