Economics Assignment: COVID-19's Impact on Market Structures and GDP

This economics assignment analyzes the economic impacts of the COVID-19 pandemic across four key scenarios. The first scenario examines the surge in demand for video conferencing software, differentiating between shifts and movements along the demand curve, and exploring the effects on equilibrium price. The second scenario investigates the market structures of Malta International Airport and Air Malta, comparing their features and identifying the type of profits gained. The third scenario defines unemployment using local references, categorizes it as either equilibrium or disequilibrium, and discusses government measures to reduce unemployment. The final scenario defines Gross Domestic Product (GDP), analyzes the reasons for Malta's economic decline, and discusses government deficit and debt trends in relation to the European Union's Maastricht Criteria.

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
1

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:
3

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
4

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.
5

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
6

(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.
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
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
8

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.
9

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.
10

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.
11