Coronavirus Has Become Serious Global Threat Questions Assessment Answer

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Question :

1. Coronavirus has become a serious global threat. In this context answer the following questions: 

(a) Use demand and supply diagram to show the impact of Coronavirus on  the market of cigarettes and other types of tobacco products Australia. [4 marks]

(b) Use demand and supply diagram to show the impact of Coronavirus on the Australian tourism industry. Discuss the impact on price elasticity of demand. [6 marks] 

(c) How is the supply of toilet paper impacted by Coronavirus? [2 marks]  

Word limit: 600 words 

2. Prices of apartments in Sydney have been falling in recent years. It is in this context, answer the following questions: 

(a) What are the major drivers of falling apartment prices in Sydney. [4 marks]

(b) Using an appropriate diagram, explain your answer in part (a) above. [2 marks]

(c)  Compare the trend of apartment prices with house prices in recent years. Are there any similarities or differences? [2marks] 

Word limit: 600 words 

3. Suppose a successful vaccine for Coronavirus has been invented. 

(a) Describe the externality that arises from people adopting the vaccine. Discuss. [4 marks]

(b) What will happen if 1/2 of the population of Australia refuses the use of vaccine. [4 marks]

(c) Discuss the market structure facing the pharmaceutical industry. [2 marks] 

Word limit: 800 words

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Answer :

Question 1

Part 1a)

As per Hefler and Gartner (2020), the coronavirus cases are growing in number for tobacco smoking. Also, the emergence evidence elaborates that smoker’s risk are more severe than non-smokers. Based on the fact, there is not much negative affects because of the virus. Initially, during Australia’s Covid– 19 phases, there has been significant sales because of public anxiety and initial stockpiling increasing the rate of incidence rates in smoking. However, in later phase, the demand decreased because smokers were more prone to coronavirus than non-smokers and less supply of tobacco products because of decline in production and drop in sales (Foulds, 2020). 

Diagrammatically, it can be presented in figure 1. The figure shows that initial demand and supply curve D and S are operating on equilibrium E. Due to stockpiling and public anxiety, the supply and demand increased respectively but this time the change in demand was little such as supply S shifted to S1 and D shifted to D2, forming a new equilibrium with increased quantity of cigarettes and other types of tobacco products at “E1” and Quantity “Q1” but at same Price “P”.

As the Covid-19 caused lockdown and the businesses were at standstill, the supply decreased drastically lower than the original equilibrium point. S1 shifted leftwards to S2. Demand even decreased because the smokers now felt the need to quit smoking and to take preventive measures. As a result, demand shifted from D1 to D2. Because of the same, the quantity decreased drastically to “Q2” at equilibrium point at “E2” with same level of price “P”.Effect of Covid-19 on Cigarettes and other types of tobacco products

Figure 1: Effect of Covid-19 on Cigarettes and other types of tobacco products

Source: (Created by Author)

Part 1b)

Travel and Tourism in Australia led to a standstill because of following restrictions

  • The international travel to Australia was restricted with 14 days self-isolation with permitting intra travel of family members in Australia (, 2020) 
  • The country’s outbreak shifts the landscape of foreign travel because as 2019 increased the industry contribution in March – May 2019 but with lockdown situation it the travel was nil in April and May 2020 (McCafferty, 2020). 

The supply and demand curve is used to measure the impact of COVID-19 on the tourism industry. A few parameters are used in order to establish the demand feature, i.e. the preferences and desire of consumers, average sales from some countries, price fixation of selected products, the expectation of consumer requirements.

 Yearly depiction of International Visitors to America

Figure 2: Yearly depiction of International Visitors to America

Source: (ABS, 2020)

The demand and supply changes can be given in the figure 3 depicting the condition of Australian Tourism. With initial demand curve “D” and initial supply curve “S”, the equilibrium was at “E”. However, on the onset of Coronavirus, with the preventive action of social distancing, the first measure taken by the government was to control travel and tourism. Asa result, the supply shifted to S1 (restriction on international tourism) and demand to D1 (travellers travel was stopped). Dur to the change the equilibrium level shifted to “E1” with price “P1” and quantity “Q1”. Effect of Covid-19 on Australian Tourism

Figure 3: Effect of Covid-19 on Australian Tourism

Source: (Created by Author)

Moreover, based on the diagram given above, the Australian Tourism decreased drastically with larger change in the tourism such as there is decrease in Q to Q1 and the change in price is not so large as compared to tourism. Hence, the demand is elastic for Tourism in Australia. The result shows that the decline in demand contributes to a decline in the provided balance price and in the supply of the balance. For the tourism industry the price elasticity is 1.0. The price elasticity is indicated by this value. The main thing of this study is that mathematical modelling allows governments to control the complex actions of the tourist industry's economic sector. At the same time, public policy must discuss a correct approach to prevent the spread of COVID-19 and to increase the status of tourism industry economic activity.

Part 1c) 

The supply of toilet paper increased in Australia. This is because of the outbreak of pandemic where health and safety concerns because one of major ways of getting averted by the virus (Moore, 2020). The topic has already been discussed from as many viewpoints as the universities have departments with several experts working from home. The amounts which have been researching the issue of "toilet papers" for years wondering why many people in public toilets take a greater, more fuller position and others, known as "small choosers," use the roll nearer to zero concentrate on the cause of the breakdown of the supply chain. Psychologists are puzzled why Toilet Paper is not necessary for preserving the life of human beings is in our panic-buying habits up there with milk and bread. Social historians wonder why toilet tissues were important because they didn't become a staple household until the 1940s.

The hygiene paper industry in Australia divides the market in two segments – one is for consumer (at home) purposes and one at commercial. With the outbreak as businesses are closed and restrictions are imposed, people are staying at home and the usage of consumer toilet paper has increased drastically causing supply to rise to meet the growing demand (Moore, 2020).

Question 2

Part 2a)

The drivers of falling apartment prices in Sydney are because of the Coronavirus as it decreased the forecasted capital growth of properties in Sydney. Although, the Sydney’s property market has been resilient with median price being 11.1% higher than last years but with pandemic and economic shock; the affect would be long lasting. Rising uncertainty and high unemployment has an effect on the loan industry, while interest rates are record low. In June, the latest figures for RBA show house credit rises of 0.2% led by owner-occupier loans, that rose up to 0.3% i.e. the lowest growth rate in 12 months. Housing financing to investors was flat during the month and down 0.7 percent a year earlier. As mentioned, the primary driver is the pandemic and the economic condition and the second would be falling rents due to impact of coronavirus (Yardney, 2020). The chart below explains the performance of rentals in Sydney for quarter 4 in June showing a decline in different region with maximum effect on City and Inner South.

Summary of Apartment Rentals in Sydney In June 2020

Figure 4: Summary of Apartment Rentals in Sydney In June 2020

Source: (Yardney, 2020)

As per article by Haydar (2020), supply needs to be increased but by decreasing prices and uplifting the government efforts to social housing. The author even believes that migration from overseas and interstate can offset the impact once the international travel commences again. 

Higher house prices induced by immigration, however, are not inherently contributing to lower affordability for housing, particularly in the longer-term, as immigration in Australia leads to higher wages, net government income and savings on various goods and services, for example public transport and mobile telecommunications. Migrants who are employed, well educated and less entitled to welfare than people in certain circumstances prior to being people have raised incomes due to higher economic development (Haydar, 2020).

Immigrants have higher job participation rates and appear to be taxable in Australia, immigration rates have raised net profits from the government, and certain non-citizens have to pay tax higher than the people, while certain non-citizens are paying more than citizens for educational education and medical services. As a result of this, immigrants in Australia have to pay more than the people. The Australian government was forced to increase the cost of living or cut wages without the net taxes it obtained from migrants (Haydar, 2020). This could entail higher wages, maybe no payment of government workers or less generous social security and services.

Part 2b)

The diagram to support the explanation in 2a) is given as:Sydney Apartments Rentals/ Pricing

Figure 5: Sydney Apartments Rentals/ Pricing

Source: (Created by Author)

Part 2c)

As per the trend analysis, the apartment prices with house prices have been lower most of the time but from July 2019 to September 2019 it showed an increase due to completion of apartments in inner Sydney area with highest apartment approvals in 2016-2018 (van Onselen, 2018). Moreover, the Sydney market shows deflation in housing bubbles in 2017-19 with being deflated before the onset of coronavirus (, 2020). The chart shown below show a trend of growth and prices in last 3 years between houses and apartment units.

Houses as well as Apartments Vacancy and Growth Change in Sydney

Figure 6: Houses as well as Apartments Vacancy and Growth Change in Sydney

Source: (, 2020)

Question 3

Part 3a)

The people adopting the vaccine would be decreasing the infection spread in a way that if a person gets vaccinated then the vaccine not only largely prevents the transmission of the virus but will even protect the people getting vaccinated. Hence, the act of being vaccinated by a successful vaccine grants the people and other to internalize and increase the social and economic activity with association of personal cost and benefit analysis (Bethune and Korinek, 2020). Hence, creating positive externality with a benefit that is extended to others by virtue.

Also, with this extension of behaviour, there would be increase in positive externalities that would impose financial mechanism that would signal quality impacting perceived value and improving health outcomes (Khanna, 2020). 

Also, it has been believed that since a long time, private innovator is the one that comes with production of new knowledge and research which possess positive externalities (Foray et al., 2020) However, if this behaviour needs to be transmitted to masses, then it is important private and government support are pursued for a large vaccine to be effective and the people to be better) off.  

Part 3b)

If there is refusal to vaccine by 50% of Australian population then it is important the virus transmission is limited to small geographical segments with little evidence of the spread. However, if Australian population are in the belief that vaccine is just a protection but there is no guarantee as vaccine reduces the severity of symptoms than completing making it resistant to disease. 

Also, Australian population have argued that many have caught the virus and produced an immune response making it a “herd community” but the idea of herd community needs to cleared stating that head community eliminates the disease with the help of vaccination (Beard, Leask and Mclntyre, 2017). Also, coronavirus does not root on natural immunity as it can become endemic by being permanently resent as common cold (Pitt, 2020). However, based on the explanation given above the 50% Australian population needs to evaluate its points as without vaccination, the disease can be more deadly, contagious and uncontrollable.

Part 3c)

In monopoly, promoting innovation in form of patent, trademark and copyright will create a barrier to entry for other firms to enter the market. The primary reason lies in research and development where the company that develops a vaccine will undergo research thereby promoting innovation for first few years so that other firms can get their investment in R&D to produce more cheaply once the duration of patent expires (Danzon and Sousa Pereira, 2011). Overall, a coronavirus vaccine with imply an ownership of concept and image through intellectual property that would be respected by other countries (Dean et al., 2020).

The pharmaceutical industry would be facing monopoly because there is need of enough research and development to be carried out because public sector does not carry research into the health needs with the ultimate burden lying on the private sector (Munoz Tellez, 2020). Moreover, pharmaceutical companies working other pharmaceutical companies can deliver viable solution for long term sustainability.