Surgical Mask: An Enquiry into the Nature and Causes of Price Behavior

F-202 - The paper paper is based on Surgical Mask: An Enquiry into the  Nature and Causes of Price Behavior. The term paper began with a brief overview of the purpose and reason behind preparing it. It covers almost about all necessary information of the respective topic. As every work has a specific function or purpose hence there is a relevant objective of this term paper. This term paper mainly deals about price behavior of a particular product.

Department of Finance
University of Dhaka
“Surgical Mask: An Enquiry into the
Nature and Causes of Price Behavior”

“Surgical Mask: An Enquiry into the
Nature and Causes of Price Behavior”
Course Name: Microeconomics
Course Code: F-202
Submitted to:
Dr. M. Masud Rahman
Professor
Department of Finance
University of Dhaka
Submitted by:
Group No: 09
BBA 25th Batch, Section: C
Department of Finance
University of Dhaka
Date of Submission: 12.10.2020

LETTER OF TRANSMITTAL
October 12, 2020
Dr. M. Masud Rahman
Professor
Department of Finance
University of Dhaka
Subject: Submission of Course Report on “Surgical Mask: An Enquiry into the
Nature and Causes of Price Behavior”
Dear Sir,
With great pleasure we would like to submit our report on “Analysis of Price Change Behavior
of Facemask” as per course requirement. It was our immense pleasure to have such a report,
and was a wonderful experience to work on it. As you will see in the following pages that we
have done an analysis on price change behavior of facemask. We have used our skills and
made effort to achieve the goal of the report. During making this report we gained various
practical knowledge and gathered interesting experiences. These knowledge and experiences
will help us in our future academic and professional purpose.
We hope that you will consider our unintended error while writing this report with clemency.
Therefore, we beg your kind consideration in this regard. We will be very helpful if you accept
our report and oblige thereby.
Sincerely,
Krititapa Biswas
On behalf of the group 9
Department of Finance
Faculty of Business Studies
University of Dhaka

Acknowledgement
We are also especially grateful to our honorable course teacher, Professor Dr. M. Masud
Rahman, Department of Finance, faculty of business studies University of Dhaka for giving us
valuable suggestions and precious contributions. The knowledge that he had provided us in
our course has worked as a beacon which has guided us while preparing this report. This
report is prepared by us solely for our academic purpose, and not for any other reason. This
report is a collaborative effort. This report could not be completed without the effort and
cooperation of our group members. Many illustrations and examples were collected from
numerous people from whom we could not obtain permission and we would like to
acknowledge them and state that we do not intend to violate any information subject to
copyright.

Table of Contents
Executive Summary ................................................................................................................................. 6
Chapter 1: Introduction .......................................................................................................................... 1
1.1: Origin of the study ....................................................................................................................... 2
1.2: Importance of this Study.............................................................................................................. 2
1.3: Objectives of the Study ................................................................................................................ 2
1.4: Limitations of the Study ............................................................................................................... 2
Chapter 2: Product Discussion ................................................................................................................ 3
2.1: Usage of Surgical Mask ................................................................................................................ 3
2.2: Types of Surgical Mask ................................................................................................................. 3
2.3: Selected Product .......................................................................................................................... 3
2.4: Current Situation of the product: ................................................................................................ 3
Chapter 3: Market Scenario .................................................................................................................... 5
Chapter 4: DEMAND, SUPPLY AND EQUILIBRIUM .................................................................................. 6
Chapter 5: Limitation of law of Demand: .............................................................................................. 10
Chapter 6: Limitation of Law of Supply ................................................................................................. 14
Chapter 7: Elasticity .............................................................................................................................. 17
Chapter 8: Special Factor Covid-19 Effects: .......................................................................................... 18
References ............................................................................................................................................ 21
Appendix ............................................................................................................................................... 22

Executive Summary
The term paper began with a brief overview of the purpose and reason behind preparing it.
It covers almost about all necessary information of the respective topic. As every work has a
specific function or purpose hence there is a relevant objective of this term paper. This term
paper mainly deals about price behavior of a particular product.
In order to prepare this term paper, we used data collected from …… by conducting a survey.
We found the following regression equation from the conducted survey:
The demand curve equation, Quantity Demand= 35-2P
The supply curve equation, Quantity Supply = 15+2P
After plotting the data derived from the survey and getting equilibrium, we had found that:
• Surgical face mask is an Inferior good
• As income increases, demand curve shifts leftward
• As substitute goods enter market with lower price, demand curve shifts leftward
• As input price increases, supply curve shifts leftward.
• As technology develops, supply curve shifts rightward
After attention should be cast upon the approaches and methods to complete the term paper.
The introductory part ended up with the scopes & confinements of the assigned subject. The
next segment of the term paper started with a brief overview of the product. Finally, we have
briefly showed the factors of price change of surgical face mask with proper graphs and
applied the theories learnt from microeconomics course.

1
Chapter 1: Introduction

2
1.1: Origin of the study
The perfect coordination between theory and practice is of paramount importance in the
context of the modern business world in order to resolve the dichotomy between these two
areas. The BBA Program under the Department of Finance offers a course named
“Microeconomics” which requires submitting a report on a specific topic determined by the
course teacher. The report under the headline “Analysis of Price Change Behavior Face
mask” has been prepared for this purpose.
1.2: Importance of this Study
The study helps us gain hands on knowledge in understanding different aspects of
microeconomics and how to apply that knowledge on a practical level.
1.3: Objectives of the Study
Some major goals & objectives of this report are mentioned below:
• To know the price changing factors of a commodity.
• To understand how price changes based on demand and supply.
• To apply microeconomics concepts on a practical level.
1.4: Limitations of the Study
• Lack of enough time
• Lack of relevant info
• Lack of experience

3
Chapter 2: Product Discussion
Medical or Surgical mask is a disposable medical device. It protects against infectious agents
transmitted by “droplets (Tellier et al., 2019).” However, it does not protect against
“airborne” infectious agents. It will therefore not prevent the wearer from being potentially
contaminated by a virus. Surgical Mask is a rectangular shaped face mask which is made of
fabric or polypropylene fiber to filter and protect the germs (Petersen et al., 1983). It is
available on different grades & styles depending on the protection level of the users.
2.1: Usage of Surgical Mask
A surgical Mask mainly does 2 things:
1. Prevents droplets of saliva or secretions from the upper respiratory tract when the
wearer exhales. If worn by the doctors/nurses, the surgical mask protects the patient
and his or her environment (air, surfaces, equipment, surgical site). If worn by a
contagious patient, it prevents the patient from contaminating his or her surroundings
and environment.
2. Protects the wearer from infection transmitted by “droplets” or from the risk of
splashes of biological fluids. In the latter case, the surgical mask must have a
waterproof layer. It can also be equipped with a visor to protect the eyes.
2.2: Types of Surgical Mask
There are four types of surgical mask which are certified by ASTM (Pourdeyhimi, 2020 ). The
classification is made on the basis of protection the mask provides
1) Minimum Protection: This type of surgical mask cannot resist biological fluid, spray or
aerosol.
2) Level 1: This mask is used in low risk situation with a biological fluid resistance of 80
mmHG.
3) Level 2: Masks in this category provide a barrier against moderate aerosol, biological
fluid and spray.
4) Level 3: This mask is for heavy protection & recommended worldwide. It can protect
any kind of germs and also 160 mmHG biological fluid resistance.
2.3: Selected Product
For our term paper, we have selected Level 2, three-layer disposable surgical mask. It is
available all over the country and used worldwide.
2.4: Current Situation of the product:
Before the corona pandemic, we hardly saw that people using surgical mask without having
any diseases. But due to the current Covid19 situation, the demand increased more than ever
for any kind of face mask. Few months back, mask had become the most wanted commodity

4
for common people. As a result, price for face mask also increased to beyond imagination.
Even though the current situation of surgical mask is little bit better comparing with march-
July period, it is not acceptable yet.

5
Chapter 3: Market Scenario
On 8th October, one of our group members, Abu Sufian Munna, went to a small local market
of Kulaura, Moulvibazar to collect relevant info about our chosen product “Surgical mask”. It
has to be said that, due to corona pandemic, it was not possible for us to go to the local market
as a team as we all belong to different areas. And for the same reason it was also not possible
for us to go any well-known enormous local market. For ensuring safety, we choose a
dispensary close to home as our local market for this term paper.
We prepared the following questionnaire for the seller of this market
1) What is the Price range of the product?
2) How much time they take for reordering?
3) What is the quantity Demand of the product?
4) Substitute & complementary products if any?
5) Do customers get Negotiation Scope?
From the market, we managed to collect the following information.
1) The normal price floor of the product is BDT 3 tk. and the price ceiling of the product
is BDT 7 taka. But due to the corona pandemic, as the wholesale price became very
high, they forced to sell it BDT 20 tk. piece. The current price of the commodity is 10
tk. which is yet unimaginable.
2) Usually, they reorder after 2-3 months. But since the current demand of surgical mask
is very high, they have to reorder after every week.
3) Since the people of this market area are not very cautious about germs & biological
fluid etc., the demand for surgical mask was very low. On an average, they manage to
sell only 25 pieces of surgical mask in a month which means that they can’t even afford
to sell 1 piece a day. While in normal situation they sold out only 25 pieces of surgical
mask in a whole month, now they are selling more than 30 pieces of surgical mask in
a day!
4) There are no complementary products for the disposable surgical mask. There are
many face masks exist in the market which are considered as substitute of one
another. But According to our local market, basic cloth masks with filter is the main
substitute product of our selected product “surgical mask”.
5) Usually buyers get very little scope of negotiating for the product “surgical mask”. But
it has turned down to almost zero in this corona pandemic.
We have taken monthly quantity demand & supply for this study.

6
Chapter 4:DEMAND, SUPPLY AND EQUILIBRIUM
The following are the demand schedule constructed from information from the market we
visited.
The demand curve equation we determined by regression analysis is:
D(Q) = 35-2P
To keep unqualified P in the function, the new equation will be:
P= (35-Q) / 2.
And the demand schedule and curve will be–
DEMAND SCHEDULE
Price QD
3 29
4 27
5 25
6 23
7 21

7
The supply curve equation we determined by regression analysis is:
S(Q) = 15+ 2P
To keep unqualified P in the function, the new equation will be:
P= (Q-15) / 2
and supply schedule and curve are following-
SUPPLY SCHEDULE
Price QS
3 21
4 23
5 25
6 27
7 29
While visiting the dispensary, the dispensary holder told us that they don’t sell the product
beyond the equilibrium price. But in pandemic situation, we saw when the demand was

8
increasing overnight and supply wasn’t sufficient, the suppliers and sellers charge more than
the actual equilibrium price. And face mask become a necessity then, so people have to buy
this product even at a higher price.
Here we put demand curve and supply curve in one graph to determine the equilibrium point.
Here we see the Demand curve and supply curve intersect each other at quantity 25 and price
BDT 5 which means the equilibrium quantity of surgical mask is 25 piece and equilibrium price
is BDT 5.
Market Disequilibrium
Surplus
0
1
2
3
4
5
6
7
8
0 5 10 15 20 25 30 35
Demand Supply
0
1
2
3
4
5
6
7
8
0 5 10 15 20 25 30 35
Surplus
Demand Supply

9
Naturally sellers want to sell a product at a price as high as possible. There come problems.
When a particular seller decides to sell a product at a higher price than others, consumers
generally buy from another sellers. As a result, for that seller surplus arises. Then the seller
has to lower the price to sell products until it meets equilibrium.
In the graph, when seller decides to make more money by selling a mask at BDT 7 the demand
is 21 unit and supply is 29 unit. As a result, surplus takes place and the surplus is 8 unit. Again
lowering 1 tk, there still arises 4-unit surplus. Now the seller lowers the price 1 tk. more and
it reaches the equilibrium price BDT 5.
Shortage
For various reasons, supply can drop. Here we see, at price 3, the seller can’t provide more
than 21 units while the quantity demand is 29 unit. So, it creates a shortage of 8 unit. To
provide more supply, supplier has to increase the price, but it will cut down the quantity
demand to 29 units to 27 units. Still there is a shortage of 4 units. So, the supplier ended up
setting the price BDT 5 which is the equilibrium price of this commodity at this market.
0
1
2
3
4
5
6
7
8
0 5 10 15 20 25 30 35
Axis Title
Axis Title
Shortage
Demand Supply

10
Chapter 5: Limitation of law of Demand:
Other Factors Influencing Demand
The factors which is not included in the law of demand but affects the demand curve, are
considered as limitation of law of Demand.
1. Income: The relation of income with demand function is different for different goods.
For normal goods, as income increases, demand also increases. And for inferior goods,
as income increases, demand decreases. But the goods are not normal or inferior
itself, rather it depends on consumer attitude towards the goods.
Surgical mask is disposable medical mask which is cheaper than other masks exist in
the market for example KN95 mask, professional grade medical mask. So, as income
increases, people tend to buy other costly masks which has better protection & it
makes the product “Surgical Mask” an Inferior goods.
Price Demand Supply Shift on Demand
3 29 21 25
4 27 23 23
5 25 25 21
6 23 27 19
7 21 29 17

11
In normal situation, the equilibrium price was BDT 5 and quantity were 25 pieces. But due to
the increase of income, people shift to other commodities which results in decreasing the
quantity demand of surgical mask. So, the demand curve shifts leftward which makes the
new equilibrium price at BDT 4 & Quantity at 23 pieces.
2. Price of related goods: Related goods are classified either substitute goods or
complementary goods.
i. An increase in the price of substitute goods will increase the demand of surgical
mask and vice versa. Recently some new masks made of cloths have introduced
in the market in lower prices which decreased the quantity demand of surgical
mask
ii. An increase in the price of complementary goods will decrease the demand of
surgical mask and vice versa. We have found no complementary goods of our
commodity.
Price Demand Supply Shift on Demand
3 29 21 27
4 27 23 25
5 25 25 23
6 23 27 21
7 21 29 19

12
In normal situation, the equilibrium price was BDT 5 and quantity were 25 pieces. But due to
the arrival of substitute products at lower price, some people shift to substitute commodities
which results in decreasing the quantity demand of surgical mask. So, the demand curve shifts
leftward which makes the new equilibrium price BDT 4.5 & Quantity 24 pieces.
3. Taste: We see that the taste of common people changes over the time. Few years
back, people were not so concern about their health & safety. But now people have
become serious about their health and they ensure safety from germs & bacteria. This
increases the quantity demand for surgical mask.
Price Demand Supply Shift on Demand
3 29 21 33
4 27 23 31
5 25 25 29
6 23 27 27
7 21 29 25
As the quantity demand increases, demand curve shifts rightward. The new
equilibrium price is tk. 6 and quantity is 27 pieces.

13
4. Bandwagon Effect: The bandwagon effect is the tendency of people to take certain
actions or arrive at a conclusion primarily because other people are doing so. Couple
of years back, there was a misconception among people that surgical mask is only for
physician. Then some people were starting to use surgical mask when they went out
from home. But, now noticing them, common people also wear surgical mask. It
increases the demand of surgical mask.
Price Demand Supply Shift on Demand
3 29 21 37
4 27 23 35
5 25 25 33
6 23 27 31
7 21 29 29
As the quantity demand increases, demand curve shifts rightward. The new equilibrium
price is tk. 7 and quantity is 29 pieces.

14
Chapter 6: Limitation of Law of Supply
Effects of other factors on supply
Primary Discussion-
Climate: Climate is considered to be a factor in case of shifting supply curve. Favorable
climate makes a rightward shift of supply curve and Unfavorable climate makes a leftward
shift of supply curve. As we have chosen surgical mask, this commodity doesn’t depend on
weather. Climate don’t have any impact on increasing or decreasing supply of surgical mask.
Changes in Expectation: Expectation is also a cause which shift the supply curve. As there are
some particular time where suppliers are willing to provide more goods supply for future
market situation. This factor is applicable for necessary goods as well as for some special
commodity. In case of surgical mask, suppliers give more attention to the summer season.
Because in summer season, environment is polluted mostly. So, suppliers are willing to
provide more goods as per increased demand. So, supply curve is shifted to right.
Price Demand Supply New Supply
3 40 21 32
4 38 23 34
5 36 25 36
6 34 27 38
7 32 29 40
0
2
4
6
8
0 5 10 15 20 25 30 35 40 45
New Demand Supply New Supply Demand

15
In Summer season, Supplier increased their supply quantity as demand was increased and
create new equilibrium quantity at 36. As supply quantity was increased, there was a
rightward shift of supply curve. But price didn’t decrease because demand of mask was also
increasing.
Changes in the price of related goods: This is also a factor that makes supply curve shift. If
the price of related goods producing decreases then suppliers will think of supplying more
related goods rather than main goods. Then the supply curve will be shifted leftward as at
same price supplier will provide fewer main goods. In case of our surgical mask this factor
can’t be applied because surgical mask is imported from other countries.
Changes in No of Sellers: If no of seller increase in a market then supply is also increase so
it is also a factor of shifting supply curve. If no of seller increase in the market then supply
quantity will also increase so the curve will shift to right and if no of seller decreases then
supply also decreases so the curve will shift left. In case of surgical mask, we have collected
information from the market where only one seller is supplying mask equipment. So, this
has no effect in our chosen commodity.
Changes in input price: Input price changing has a big impact on supply curve shifting. If the
input price of a good increases then supply decreases. Because when input price increase
suppliers can’t provide goods at the same price as demand remains the same. So, there is a
leftward shift in supply curve.
Price Demand Supply New Supply
3 29 21 18
4 27 23 20
5 25 25 22
6 23 27 24
7 21 29 26
0
2
4
6
8
0 5 10 15 20 25 30
Demand Supply New Supply

16
In case of surgical mask, before the input price increases the equilibrium, price was 5 and
equilibrium quantity supplied was 25. But after the input price increase, supplier couldn’t
supply the same quantity at same price. So, Supply was decreased and the supply curve shift
to the left and create new equilibrium price of 5.75 taka and new equilibrium quantity
supplied was 24.
Changes in Technology: Technological advancement is a factor of supply curve shifting. If
technology is advanced then suppliers can supply more goods at the same price. So, if
technology is advanced, then supply curve will shift to right.
Price Demand Supply New Supply
3 29 21 23
4 27 23 25
5 25 25 27
6 23 27 29
7 21 29 31
In case of surgical mask, before the technology advancement, the equilibrium price was 5 taka
and equilibrium quantity supplied was 25. After the technology advancement, supplier was
able to provide more quantity at the same price. So, Supply was increased and supply curve
shifted to right and create new equilibrium price at 4.5 and new equilibrium quantity at 26.
0
2
4
6
8
0 5 10 15 20 25 30 35
Demand Supply New Supply

17
Chapter 7: Elasticity
Elasticity of Demand
Elasticity means changes in quantity in response to changes in price (Gibson and Kim, 2019).
There are three kinds of elasticity of a product
1. Unitary elasticity: It means percentage changes in quantity demand is equal to
percentage changes in price. Here, demand curve will not be steeper or flatter
2. Highly elastic: It means percentage changes in quantity demand is higher than the
percentage changes in price. The flatter the curve is, the more elastic it is.
3. Low elastic: It means percentage changes in quantity is lower than percentage changes
in price. The steeper the curve, the more inelastic it is.
At equilibrium,
P= 5, Q= 25
Here,
The demand function = 35-2P
∴ Slope of Demand Function = d/dp (35-2P)
= 2 (taking absolute value)
So, Elasticity of Demand at equilibrium,
= (Changes in quantity÷ Changes in Price) X (Price ÷ Quantity)
= 2 X (5 ÷ 25)
= .4
As the elasticity of protective equipment is lower compare to other goods, it was expected
that the elasticity for surgical mask will also be lower. Here the value 0.4 < 1 suggest that, the
quantity demand of surgical mask is insensitive to price which means lower elasticity. So,
when price goes up or goes down, people buying habit is not as much change as the price
changes.

18
Chapter 8: Special Factor Covid-19 Effects:
Market size of surgical face mask is not defined (Forouzandeh et al., 2020). Since the outbreak
of pandemic demand raised up to 18 to 20 times in the area and price has seen a peak of 9
times higher but later has been controlled and eventually reduced to two times higher than
normal level.
Unprecedented demand burst but created a dangerous shortage. Wholesale market went out
of stock because shipment from China that previously met 95% of ours mask demand had
stopped; domestic production was incompetent and also needed imported inputs. All these
reasons lead to a price hike in wholesale market which led to a retail price increased to more
than seven hundred percent. In this market price went up to 45 Tk per piece.
Response in Bangladesh was ceiling on market price, boosting supply through resuming
import, donation and encouraging domestic production capacity. Hence, supply was
increased a little, still far from fulfilling the immense demand.
At the starting of pandemic situation:
This is a small village area market, break out of pandemic news irritated the people here
slowly. Price had gone up to 45 tk from 5 tk which is an 800% increase. It was because, due to
the shortage in wholesale market, supply quantity was only 20 when almost 70- 80 was
demanded quantity. So, people paid this high price for mask backed by panic buying, making
the demand of mask inelastic.
45
5
20 250
Y
X

19
Mid time of pandemic: when the wheel of supply started moving a little, supply increased
but not significantly relative to the immense demand. To control the previous too high price,
a ceiling was imposed. Then retail price was 30tk per piece mask when supply quantity met
only 150, which was lower than demanded quantity. Almost 500 people was ready to pay the
price but supply quantity was not enough. Thus, demand curve remained as steeper as it was
at the start of pandemic.
Last Stage of Pandemic: Finally, the current price ceiling was set to 22 tk per piece of mask.
Now, the price is reduced to 10tk per piece mask. Supply quantity is 300 which can be
increased a little more if needed. But the demand of mask has lowered as lockdown is
removed, people are being less serious regarding CoVID-19 attack, and leaving home for
workplace. Thus, the equilibrium price was set to 10 taka, quantity 300.
45
30
25 150
Y
X

20
Conclusion:
Before pandemic situation, mask would probably have stayed as a commodity which only
people, health conscious or having condition, buy. But situation has changed. It seems
demand of mask will stay like this essential commodity for a long time in the future. Although
supply is insufficient relative to demand at present, price controlling is keeping the
commodity in people's affordable zone. But in the upcoming future, production is supposed
to be increased substantially which may automatically normalize the price and bring it down
to the price back in pre pandemic situation.
25 150 3000
10
30
45
Y
X

21
References
Forouzandeh, P., O'Dowd, K. and Pillai, S.C., 2020. Face masks and respirators in the fight
against the COVID-19 pandemic: An overview of the standards and testing methods. Safety
Science, p.104995
Gibson, J. and Kim, B., 2019. The price elasticity of quantity, and of quality, for tobacco
products. Health economics, 28(4), pp.587-593.
Petersen, N.E., 3M Co, 1983. Anti-fogging surgical mask. U.S. Patent 4,419,993.
Pourdeyhimi, B., 2020. Surgical Mask Particle Filtration Efficiency (PFE). The Journal of Science
and Medicine, 2(3), pp.1-11.
Tellier, R., Li, Y., Cowling, B.J. and Tang, J.W., 2019. Recognition of aerosol transmission of
infectious agents: a commentary. BMC infectious diseases, 19(1), p.101.

22
Appendix