Microeconomics Course Report: Surgical Mask Price Behavior Analysis

This report, prepared by students from the Department of Finance at the University of Dhaka, examines the price behavior of surgical masks using microeconomic principles. The study investigates the factors influencing price changes, including demand and supply dynamics, market equilibrium, and the impact of the COVID-19 pandemic. The report includes an analysis of the product's usage, types, and current market scenario, drawing on data collected from a local market. The authors employ regression analysis to derive demand and supply curve equations, exploring concepts such as elasticity and the limitations of supply and demand laws. The findings highlight how external events and market conditions can influence the price of essential goods like surgical masks. The report provides insights into the practical application of microeconomic theories and offers a comprehensive overview of the surgical mask market during the pandemic.

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.

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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