The assignment is in two parts – Part I and Part II. In both parts, you are required to use economic tools and concepts you learn from Week 1 to Week 4 of this unit.
In Part I, you will read a description of the market of hand sanitizers and analyse the impact of a sudden increase in domestic demand on hand sanitizers, and then combine this with the impact of disruption of supply chains under the demand and supply model. You are required to focus on the domestic market only.
In Part II, you are required to produce a written report on the impact of COVID-19 on the market of semiconductors. You will analyse the market of semiconductors under the demand and supply framework. To be specific, you are required to identify major factors that cause the demand and supply imbalances of semiconductors in recent years. To support your argument, you are required to provide at least one diagram.
Part I : Market of hand sanitizers in Malaysia
At the beginning of the outbreak of the COVID-19 pandemic, the price of medical supplies including face masks and hand sanitizers increased significantly, and the quantity sold also increased in Malaysia. There was a domestic shortage of hand sanitizers, and this was due to soaring demand and disruption of supply chains. Please note that we only focus on the domestic market.
You are required to draw three supply and demand diagrams to illustrate sequential changes in the domestic market for hand sanitizers in Malaysia during COVID-19 pandemic. And, explain how the impact caused changes in the market and how the market adjusted to a new equilibrium price and quantity after the change, using the diagram:
- Many more people wanted to purchase and use hand sanitizers.
- The supply chain was negatively affected due to a reduction in the availability of ethanol, plastic bottles and bottle accessories. Reproduce the diagram you drew for part a) and add to demonstrate this additional impact on the market.
- Now, assume that there were new entrants in the market of hand sanitizers. Assume that several firms that had never made hand sanitizers decided to begin producing hand sanitizers. Reproduce your diagram from part b) to illustrate this additional impact on the market for hand sanitizers.
Each of your diagrams must be fully labelled and digitised: both axes, all curves, all prices and quantities labelled on the axes and each equilibrium point. Each diagram must have a heading. Use letters such as P1 and Q1 or similar, rather than actual price and quantity numbers. A photo of hand drawn diagrams is not acceptable.
In Question 1a), you drew a diagram to illustrate the increased demand for hand sanitizers after the pandemic. It is likely that not only would demand increase, but the price elasticity of demand would also change as a result of the pandemic. Explain how and why the price elasticity of demand is likely to change, and how this will affect the demand curve you have drawn in Question 1a). (No need to illustrate).
Part II: Demand and supply imbalances of semiconductors
Read the following articles on the market of semiconductors from the Economist (in case you cannot access the articles, please use the two copies in “Supplementary Reading for Assignment 1” folder):
Assume that you have been hired as a consultant for the World Bank to prepare a written report on the impact of COVID-19 on the market of semiconductors. Your report must address the following issues:
- What is a current major issue concerning on the market of semiconductors?
What has caused the changes in the price of semiconductors? (Hint: Identify two or three major demand and supply factors)
Will the current semiconductor demand and supply imbalance persists? What are the policies/ways to solve the current imbalance?
Specific instructions for Part II
- Students are expected to provide at least one diagram to present and/or support your arguments.They may draw a chart or figure with data or they may draw a graphical illustration of the supply and demand model. A photo of hand drawn diagrams is not acceptable.
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