Economics Assessment: Analyzing Markets and Evaluating Economic Policy

This economics assignment delves into various microeconomic concepts and their real-world applications. It analyzes the impact of the COVID-19 pandemic on the new and used car markets, explaining shifts in demand and the factors influencing consumer choices. The assignment further explores the effectiveness of carbon tax policies in reducing air travel emissions, considering the price elasticity of demand. It examines Australia's vaccine rollout plan, evaluating its fairness and efficiency, and discusses the implications of market-based vaccine allocation. Finally, the assignment investigates the face mask market during the pandemic, analyzing supply and demand dynamics, market structure, and the potential effects of price ceilings, ultimately arguing that the market itself can address shortages without government intervention. Desklib provides access to this and many more solved assignments and past papers for students.

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

its plan it which various phases for vaccine were formed. Vaccine was provided to workers
who were still on national duty after that elder people, middle aged and now vaccine for
children has been initiated. The allocation methods were as following:
Phase 1a- Priority group- National workers
Phase 1b- priority group- Elders and other healthcare workers
Phase 2a- priority group- elder adults and adults
Phase 2b- priority group- People aged between 16-39 and other remaining un-vaccinated
from previous phases.
Phase 3- priority group- Children aged 12-15
The early vaccine was highly televised so that Australians are assured about its efficacy,
safety and quality for fighting with the Corona virus. A huge range of clinics participated in
vaccination all over the nation. The government prioritise the elders over adults as elders
have higher risk for catching the virus than others. This was fair and equal. Earlier it was
mentioned that it is not safe for children to get vaccinated, but now the safe vaccine has been
formed and tried which is currently being provided to the children of age 12-15. The trials are
being made to get something which is safe for younger children too.
(b) It is extremely impossible to leave the market to decide who should get vaccine first. If
there is limited quantity of vaccine and the vaccine mechanism is through price, then the rich
people will buy all the vaccine slots and poor people will suffer. This will star a raging war
between communities and the social system will become unbalanced.
(c) Yes, vaccines should be free even considering their positive externalities. This is the only
way to end COVID-19. If vaccine is not free, then only rich people will be able to afford it.
Even if the prices are relatively low poor people will prefer not to get vaccinated. It will
increase the risk of virus. It will become difficult to control spreading of virus in the country
and in the world as well. The positive outcome of vaccination has increased the trust of
people on vaccine and have encouraged others to get vaccinated too.
Question 4:
Answer
Introduction

In this essay, I will argue that the shortage of masks have become a
part of daily wear and a necessity as well. The demand and supply of the face masks in short
run is highly un-changeable. In the essay, the demand and supply, market type and pricing of
face masks will be discussed.
1) In the early 2020, the world faced a shortage of face masks in the beginning of pandemic.
In the beginning of COVID-19 pandemic, the government made it necessary for everyone to
wear face masks in order to avoid the risk of corona virus. At that time certified face masks
were declared essential until the vaccine was found (Elachola, Ebrahim andGozzer, 2020).
The immediate solution was face masks.
The major reason behind it was the sudden increase in demand and low
supply. A major disruption between domestic demand and global supply was surged. The
countries have imposed restrictions on imports to stop the spread of corona virus but it
increased the shortage of masks worldwide. Vaccine was not available at that time, and
masks was only solution for protection. As the face masks protected people from viral
infection, the worldwide hype in the demand of billions of face masks surged every day. The
situation continued and accelerated the worldwide shortage of face masks. One of the reason
was that the primary hub for making masks was China. As the virus spread, people were in
their homes which slowed the manufacturing and stopped shipping of them to the other
countries (Khan and Parab, 2020). The countries were not prepared for the virus to spread on
this level. The stocked piles of were never intended to be nation’s saviour. In few months the
warehouses were empty.
This lead to the conclusion that the main reason behind the shortage of face masks were non-
preparation of the situation and the fear in the minds of people. The virus spread very fast and
there was no vaccine or any other medical solution for virus. People were dying every day
which scared other people. This hyped the demand of face masks suddenly which lead to
shortage of face masks.
D1
D2
Q2
Q1
Demand

2)
In short run, the demand and supply of face masks will be inelastic. In the short run even if
the prices of face masks increase, even then the customers will buy the face masks. Face
masks are a necessity and it is mandatory by the government to wear them (Kirubarajan and
et.al., 2020). Even if the prices are increased, the customers will buy the masks. However, In
the long run the demand and supply of face masks will be elastic. It means if the prices of
face masks increases, then the demand for face masks will decrease. People will prefer other
buyers or other methods instead of buying expensive face masks.
3) Price ceiling of mask means that the fixed market prices for masks will be set by
government. However, this policy is considered bad due to many reasons. The major problem
with [rice ceiling of masks is that prices will be set at relatively low price than previous
prices. Consumers will buy more products i.e. face masks due to low prices and the suppliers
will produce less because of low profit margin. It will create shortage in the country. Stocks
of face masks will replenish as the exporters will sell their products in other countries where
they are getting more prices. So in short, it can be summarised that price ceiling will be a bad
policy for face masks.
4) Face mask market is close to a perfectly competitive market. Due to COVID-19 global
crises face masks were considered as one of the protective measures. It was made mandatory
by the government to wear face masks (Wu and et.al., 2020). It lead to sudden increase in the
demand of face masks. A perfectly competitive market is a market in which there are many
firms who are selling homogeneous products. Due to increase in demand of face masks,
many companies started producing face masks. Face mask market have all the characteristics
of a perfectly competitive market.
The producers have free entry and exit in the industry. Face masks industry also do not have
any restrictions which provides free entry to all the producers on various levels.
There are a large number of producers and a large number of customers in the market.
Supply

All the products being sold are homogeneous. Every producer is providing various types of
face masks.
5) With the assumption that face masks market is perfectly competitive market it can stated
that rise in prices will provide above normal profits to the producers and in longer run the
producers will earn only normal profits (Lepelletier and et.al., 2020). It can be described with
the help of following diagrams:
In Short run:
Price
P1
P2
Interpretation: In the diagram the price changes but the demand curve does not move. It
means that any change in prices in short run will not change the demand of face masks.
In long run:
Prices
P1
P2
Demand D1
Demand D1D2

Interpretation: from the above diagram, it can be interpreted that in long run if the prices of
face masks increase, the demand for them will reduce too. People will shift to other methods
or other competitors and demand will fall.
6) The market itself can solve the problem of shortage of face masks without the
intervention of government. If the producers are willing to sell face masks on relevant
rates, the customers will buy it. The producers themselves can set the rates of face
masks as per their quality and differences given that the prices are affordable (Worby
and Chan, 2020). The local producers can take advantage of this opportunity and
provide their products in affordable prices. This will help them in income generation
as well as the customers will have easy availability of face masks. This will eliminate
the problem of shortage as well as problems related with price ceiling can also be
abolished.
Conclusion
From the above discussion, it can be concluded that, face masks are a
necessity. In the long run demand and supply of face masks will be inelastic but is likely be
inelastic during long run. Price ceiling, will be a bad policy as it will reduce the supply and
consumers will face shortages.
References
Books and journals:
Elachola, H., Ebrahim, S.H. and Gozzer, E., 2020. COVID-19: Facemask use prevalence in
international airports in Asia, Europe and the Americas, March 2020. Travel medicine
and infectious disease. 35. p.101637.
Kirubarajan, A. and et.al., 2020. Mask shortage during epidemics and pandemics: a scoping
review of interventions to overcome limited supply. BMJ open, 10(11), p.e040547.

Khan, M.M. and Parab, S.R., 2020. Simple economical solution for personal protection
equipment (face mask/shield) for health care staff during COVID 19. Indian Journal
of Otolaryngology and Head & Neck Surgery. pp.1-5.
Lepelletier, D. and et.al., 2020. What face mask for what use in the context of the COVID-19
pandemic? The French guidelines. Journal of Hospital Infection. 105(3). pp.414-418.
Worby, C.J. and Chang, H.H., 2020. Face mask use in the general population and optimal
resource allocation during the COVID-19 pandemic. Nature communications. 11(1).
pp.1-9.
Wu, H.L. and et.al., 2020. Facemask shortage and the novel coronavirus disease (COVID-19)
outbreak: Reflections on public health measures. EClinicalMedicine. 21. p.100329.