Question

For each of the following scenarios, use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity in the specified competitive market. Explain whether there is a shift in the demand curve, the supply curve, or neither.

(a) AirAsia is the biggest low-cost carrier in the ASEAN region. Covid-19 lead to a drastic decrease in terms of passengers. Show the effect of Covid-19 on the airline industry (supply and demand curves).

b) In lieu of (a), AirAsia had recently announced various cost-containment measures including a pay cut, free munch and external training suspensions, duty travel restriction and significant social events cancellations for the year. Illustrate the effect of these cost-containment measures on the supply curve for each measure (if any).  

Answer 1