Question

L CASE STUDY

The COVID 19 virus causes not only sickness and death to millions of people. It also
resulted in business closure, loss of income for many workers, and increases in the
demand for face masks all over the world. The Wuhan Medical Industry in China is the
sole manufacturer of the N95 mask and the surgical mask but due to lockdown, the firm
was unable to supply the need for the product of many countries afflicted by the dreaded
virus. Compared to the surgical mask, the price of the N95 mask is higher, because of its
ability to effectively filter dust, pollution, and viruses.

1) A. Assume yourself as the seller, how do you think the demand for the surgical and N95
masks will affect its price. Justify your answer.
B. Based on the above scenario, will there be a movement or shift in demand? Explain.
C. What will happen to the demand for surgical mask if the price of N95 mask is higher?
What about the N95 mask? How do you call the changes that will appear on the
demand curve? Graphically illustrate and explain your answer.

D. Discuss any two determinants of demand affected on the above given scenario.

Answer 1

1. Demand for N95 masks will increase drastically after the consumers are informed that these masks are effective during times of COVID-19.

Demand curve for N95 masks will shift to the right, leading to an increase in both price and quantity of masks sold.

2. There will be rightward shift of demand curve

3. If price of N95 masks is high, then consumers would switch to its substitute mask ie the surgical mask

Demand for surgical masks would increase, shifting its demand curve to the right, leading to an increase in its price and quantity sold.

As compared to market for N95 masks, there will be leftward movement along the demand curve. As price of these masks rises, its quantity demanded would fall

4. Price of substitute good

Consumer awareness

Both these will affect demand curve for masks