EMBA04 Economics Assignment: Market Analysis and Economic Impact

This economics report analyzes the impact of the COVID-19 pandemic on various economic aspects. It begins by defining demand and supply, distinguishing between shifts and movements along the demand curve, and examining the surge in demand for video conferencing software. The report explores the effects on equilibrium price and discusses changes in demand due to the pandemic. Scenario 2 investigates the market structures of Air Malta and Malta International Airport, comparing their features and differentiating between them. The report then examines the types of profits gained in the short term and compares the two market structures to perfect competition. Scenario 3 defines unemployment, distinguishes between equilibrium and disequilibrium unemployment, and analyzes government measures to reduce unemployment. Finally, Scenario 4 discusses Gross Domestic Product (GDP), reasons for declining economic growth in Malta, nominal GDP, and trends in government deficits and debt, relating these to the European Union's Maastricht Criteria. The report provides a comprehensive overview of economic concepts and their real-world applications during the pandemic.

Economics

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
SCENARIO 1...................................................................................................................................1
Defining demand & supply.........................................................................................................1
Distinguishing between a shift of demand function and a movement........................................1
Video conferencing software have huge surge within demand because of COVID-19
pandemic.....................................................................................................................................3
Examining the key effects on equilibrium price associated with video conferencing software. 4
Examining change in demand and also consequently equilibrium price because of COVID-19
pandemic.....................................................................................................................................5
SCENARIO 2...................................................................................................................................6
Identifying the market structures within which the Air Malta and Malta International Airport
operate.........................................................................................................................................6
Examining the key features of each market structure.................................................................7
Distinguishing between the 2 market structures.........................................................................7
Examining the type of profits which has been gained in short period........................................7
Monopolistic competition...........................................................................................................8
Comparing the 2 market structures to perfect competition.........................................................9
SCENARIO 3.................................................................................................................................10
Defining the term unemployed.................................................................................................10
The COVID-19 pandemic led to an increase in unemployment. Explain whether this was an
increase in Equilibrium or Disequilibrium Unemployment. Justify your answer by defining
these two types of unemployment.............................................................................................10
Diagram for 2 types of unemployment.....................................................................................11
Examining the 2 key measures taken by government to reduce type of unemployment..........12
SCENARIO 4.................................................................................................................................12
Gross domestic product (GDP).................................................................................................12
Reason of declining the Malta’s economic growth rate............................................................13
Nominal GDP and explaining why former is more realistic measure......................................13

Examining the trends of each of the Malta government deficit and government debt over the
years..........................................................................................................................................14
Explaining how this mainly abides to the European Union Maastricht Criteria.......................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Economics is a branch of the knowledge which is significant to effectively study how the
people tends to interact with the things which are of value. Focuses mainly focuses on the key
interactions and behaviour. It is a social science which mainly deals with production,
distribution, and effective consumption of the goods and services. This study will highlight on
the economic skills and knowledge in the real life situations. The present study will focus on
examining the various scenarios in order to gain wider set of answers associated with the specific
questions. This study focuses on effectively depicting the diagram associated with the market.
The present study will focus on examining change in demand and also consequently equilibrium
price because of COVID-19 pandemic. It also focuses on distinguishing the 2 market structures.
Furthermore, this study also demonstrates the supply and demand, unemployment and GDP.
SCENARIO 1
Defining demand & supply.
Demand is referred to as an economic principle which is mainly referred to as the desire of the
consumer to effectively buy goods and services. The consumer is however willing to pay a
certain specified price for the goods and services. The demand curve shows relationship between
price of goods and the demand in quantity for specified time period (Rafieisakhaei, Barazandeh
and Tarrahi, 2016, May). Demand curve is downwardly sloped. It tends to hold all the other
elements constant and it leads to increase in the price of goods will eventually leads to decrease
in quantity demanded.
Supply is considered to be as the key fundamental within the economics which mainly focuses
on effectively describing the total amount of goods which in turn has been available at specified
set of price to the consumers. Supply curve is however the graphical representation associated
with correlation between price of goods and services and the amount or quantity of goods which
has been supplied for the specific period. The supply curve tends to move in an upward direction
from left to the right.
Distinguishing between a shift of demand function and a movement.
Movement along demand curve
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A movement along demand curve mainly happens because of the change in the prices. The
movement along the demand curve mainly happens because of the change within the quantity
demanded and it has only been caused by change within the price (Heakal, 2015).
Shift within the demand curve
A shift within the demand curve tends to state that, at same price consumers wishes to buy more.
In this specific case scenario, i.e., video conferencing apps has seen huge surge in the demand
because of the COVID-19pandemic and switch to the remote working. However, a shift within
the demand curve tends to usually take place when the other determinants of the demand other
than price tends to change. High surge within the video conferencing apps has led to shift of the
demand curve to the right as the determinant has led to the increase in the demand.
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Video conferencing software have huge surge within demand because of COVID-19 pandemic.
The law of demand tends to demonstrate that, when the price goes down the demand of the
specific products and services also increases. However, when the price goes up the demand of
the specific products and services decreases. The key determinants of the demand are price,
number of buyers, price of other goods, income, expectations about future, supply, quality and
taste and preference. Video conferencing software and also video chat applications has also seen
a huge surge within demand because of the COVID-19 pandemic. This in turn has eventually
affected the demand of the video conferencing apps. In the specific case scenario, number of
customers for the use of video conferencing app has significantly increased. This way it has led
to high surge within the demand. This has eventually led to the shift of the demand curve to the
right. This is mainly because of the increase in the demand of the video conferencing apps and
attain higher operational goals and efficiency (Zhao and et.al., 2017). However, the rightward
shift within the demand curve because of change in one of the determinant of demand has led to
increase in the demand of the conferencing software in the COVID-19 pandemic.
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Examining the key effects on equilibrium price associated with video conferencing software.
The equilibrium price tends to state a situation where the supply of the specific goods tends to
match the demand. This also demonstrates that, the forces of the demand and supply are
relatively equal and states that, market is in a specific state of equilibrium. An increase in the
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demand of the video conferencing app and the supply tends to remain unchanged then it
eventually leads to high degree of equilibrium price and the quantity. Equilibrium state is defined
to as the state where the demand in the quantity is equal to the supply of the quantity. The forces
associated with the demand and supply has been significantly equal and tends to ensure the
market state of equilibrium.
Examining change in demand and also consequently equilibrium price because of COVID-19
pandemic.
Another scenario is that, there seems to be increasing demand of the masks and sanitizers within
the market because of the COVID – 19 pandemic. The demand of the masks and sanitizers has
eventually surged at height. There seems to be rise in the price of the masks and sanitizers
because of the increasing demand in the market and shortage of supply of the masks and
sanitizers as the quantity demanded within the market (THE EFFECTS OF CHANGES IN
DEMAND AND SUPPLY ON EQUILIBRIUM PRICE AND QUANTITY, 2020). There seems to
be no change in the demand of the masks and sanitizers, because of the increase in the price of
the products. This in turn is mainly because this commodity of utmost necessity at the time of
pandemic. In this specific case scenario, there seems to be increase in the price equilibrium and
the quantity of the good demanded. Excess demand will results in rise in the price. The producers
within the market intends to sell more which eventually leads to increase in the output. However,
when both the demand and supply of the goods increases it leads to higher purchase by the
consumer irrelevant of the price of the masks and sanitizers.
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SCENARIO 2
Identifying the market structures within which the Air Malta and Malta International Airport
operate.
The market structure within which the Air Malta and Malta International Airport operate is that it
mainly has descriptive set of organizational term which is relevant to evaluate the economics
within the market. The degree of competition in the Malta is high. Perfect competition market
structure has been applied for the Malta International Airport as it tends to provide identical set
of products and services to the customers (Knittel and Pindyck, 2016). All the firms are
considered to be as the price takers. However, Air Malta has a monopolistic market competition.
This is a market structure where many firms focuses on offering similar set of products and
services within the market.
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Examining the key features of each market structure.
The key features associated with the perfect competition is that, there are large number of the
buyers and sellers within the market. Every company tends to make similar range of products.
Another major feature is that, the buyers and the sellers has the access to the perfect information
related with the price. There is no transactional cost and the barrier to the entry related with the
entry and exit from the market.
The key features associated with the monopolistic competition is that, it offers differentiated
products. There are too many firms (Richards‐Shubik, 2015). The company who belongs to this
market structure in turn has the freedom to entry and exit. They also tends to make independent
decision making. There seems to be some degree of market power and also the sellers and the
buyers have imperfect set of information.
Distinguishing between the 2 market structures.
Perfect competition Monopolistic competition
Perfect competition provide identical set of
products and services to the customers.
This is a market structure where many firms
focuses on offering similar set of products and
services within the market.
Number of sellers within the perfect
competition market structure is very large.
Number of sellers within the monopolistic
competition market structure is fairly large.
Products offered are homogeneous. Products offered are differentiated.
The firm who tends to belong to the perfect
competition does not have any control over the
price. Such compares are the price taker.
The firm who tends to belong to the
monopolistic competition tends to have some
degree of control over the prices.
The demand curve of the perfect competition
market is perfectly elastic.
The demand curve of the monopolistic
competition market has been sloped negatively
and is considered to be more elastic.
Examining the type of profits which has been gained in short period.
Perfect competition
The company who mainly focuses on effectively maximizing the profits is mainly attained when
the marginal revenue of the company is equal to the marginal cost. However, marginal revenue is
considered to be as the slop associated with the revenue curve, which is also relevant to the
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demand price and curve. Within the perfectly competitive market, the company can only
experience the losses and profit within the short period of time. In the long period, the losses and
the profits of the company has been eliminated because infinite number of firms tends to produce
homogeneous set of products.
Monopolistic competition
The monopolistic competitor tends to produce that degree of output and also tends to charge the
price which has been indicated by the demand curve of the firm. However, in case the company
is in a monopolistically competitive industry they have been earning economic profits.
Moreover, the industry will also attract entry of the company until profits has been driven down
to 0 in the long period (Guiso and et.al., 2017). A monopolistic competitive company will be
focusing on maximizing its profits by effectively producing products to the specified level where
the marginal revenues is equal to the marginal costs. Moreover, the profit maximizing price of
goods has been determined which is based upon where profit maximizing quantity price tends to
falls on average revenue curve.
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Comparing the 2 market structures to perfect competition.
Monopolistic market structure is different from the perfect competition market. This is
mainly because of the fact that, number of sellers within the monopolistic competition market
structure is fairly large. On the other hand, the number of sellers for the perfect competition
market structure is very large. Products offered are differentiated within the monopolistic
competition and the firm tends to have some degree of control over the prices. Moreover, the
demand curve of the monopolistic competition market structure has been sloped negatively and
is considered to be more elastic. However, when the same has been compared with the perfect
competition market, it has been evaluated that, products offered within such market structure are
homogeneous. The demand curve of the perfect competition market is perfectly elastic. Also, the
company does not have any control over the price.
Monopoly market structure and the perfect competition market structure tends to significantly
mark the major market structure. One of the major similarity associated with the Monopoly
market structure and the perfect competition market structure is that, they tend to face same
degree of production and cost function (Magacho and McCombie, 2017). Within the perfect
competitive market, the price is equal to the marginal cost which the firms tends to earn at the
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