Question

During the novel coronavirus (COVID-19) pandemic, the Malaysian government introduced lockdown measures and travel restrictions that severely reduced the trade of many small businesses. The Malaysian government is concerned about business closures, loss of income and unemployment in the markets concerned and is considering further interventions especially as the danger from the virus is beginning to subside. Using the demand-supply model, explain these phenomena in one or two markets of your choice. Advise which market interventions, if any, the government should conduct in these markets and why.

Answer 1

Coronavirus pandemic has impacted businesses across the globe, leaving several unemployed.

When Malaysian government introduced lockdown, it would have impacted several business especially the small scale ones. These could be the fast food trucks, taxis, salon services, restaurants etc.

One of the markets which would have suffered major setback is the food truck market. These are the trucks which may be present near the offices, schools, universities etc. Using the demand and supply model, it can be said that the income would have been impacted when the demand for these would have reduced. In the times of lockdown, these institutions like workplaces and colleges would have been shutdown which would have led to a reduction in demand of food from these trucks. This would have rendered most of the workers and owners jobless. Since the business is not at a large scale, the workers would not have been compensated for the loss of work and business.

Another market which would have been impacted is the transportation market or the taxi services. Since there has been restrictions on travel, the demand for taxis would have reduced. But the supply will remain constant. This would impact the prices, but due to lockdown, these drivers would be rendered unemployed. This would affect their lives and their ability to fulfill their essential needs ,since most of these drivers and other small business workers would not have insurance covers.

The government can intervene by providing direct benefit transfers to these workers, which would ensure transparency and the workers would be able to maintain a minimum level of subsistence. Another intervention could be by providing dry food materials like rice and other foodgrains at specified shops or providing food coupons to the workers. This would ensure that the people are able to get food and other necessities, till the work resumes or lockdown ends.

(You can comment for doubts)