The effects of the coronavirus will have far-reaching effects on economies worldwide. The outbreak began in China, which is sometimes referred to as the workshop of the world. While Ireland’s direct exposure to China is small in that it accounts for just 4pc of goods exports and 2.5pc of services, it is a growing market, and tourism and investment links are on the rise. China sits at the center of global supply chains that criss-cross a world in which parts of products are sourced in one country, assembled in others, and finally sold here in shops up and down the country. China is a prolific exporter of essential factory goods, and as an increasingly important consumer market for the rest of the world. There is widespread concern that assembly lines around the world could be forced to shut down for lack of components made in China.
A number of months ago the Chinese government imposed quarantine restrictions in response to the coronavirus, which was mostly concentrated in the province of Hubei, an industrial center for cars, electronics, textiles, and machinery. The outbreak has rekindled fears of a global wave of infections that are similar to the concerns that emerged during the severe acute respiratory syndrome (Sars) outbreak which killed 800 people across the world in 2003 after it broke out in China’s Guangdong province.
At the beginning of the outbreak consumers worldwide began to stockpile certain items. In Hong Kong, hundreds of toilet rolls were stolen by armed robbers. Toilet rolls became a hot property in the densely packed business hub, despite government assurances that supplies remain unaffected by the virus outbreak. Supermarkets found themselves unable to restock quickly enough, leading to sometimes lengthy queues and shelves wiped clean within moments of opening. Also purchasing on staples like rice and pasta as well as hand sanitizer and other cleaning items increased.
In the early months of the outbreak empty spaces where hand sanitizers used to be in shops like Boots, Tesco and Aldi led to people checking out websites like eBay for these products. In February a hand sanitizer was selling online for €3 and on a given day 40 were sold, a month later the same product was available for €4 with sales of 35 on a given day. The shops which still had stocks were rationing the purchase to two units per customer within some cases accompanying signs saying the rationing is to ensure that as many people as possible are protected. Articles appeared online outlining how we could make our own sanitizers at home. In March, Irish Distillers – the makers of Jameson Whiskey and part of the global drinks group Pernod Ricard are starting to produce hand sanitizing gel. This will be provided to the Health Service Executive free of charge in partnership with Cork firm Mervue Laboratories.
In the early weeks/months of the outbreak, it was reported that the world was facing a “chronic shortage” of personal protective equipment in the fight against the coronavirus. This then led to factories like Irema in Limerick scaling up their production. In operation in Kilmallock since 1985, Irema has plenty of experience of global health scares that have been to the forefront of providing increased global mask supply during the SARS epidemic in 2003 and the Swine Flu pandemic in 2009 among others. The Covid-19 coronavirus is surpassing both of these in terms of global demand. In January we were turning out 1.3 million masks a week and now (June 2020) we are doing four million and this figure is growing all the time,” Kieran O’Brien, the company’s marketing manager told the Irish Examiner.
On June 19th, in Ireland, Taoiseach Leo Varadkar announced that there would be an acceleration to the easing of restrictions that had been implemented due to COVID 19. Several businesses that were not due to re-open until later phases were moved into phase three commencing on June 29th. Gyms, cinemas, hairdressers and barbers, etc. can reopen from the 29th of June.
Analyze the above case study using Demand, Supply and Equilibrium in Markets for products like surgical masks, hand sanitizers, and food staples like rice and pasta. Consider the situation from the early months of the virus outbreak to the present time. Include diagrams in your answer.
Using the Aggregate Demand (AD) and Aggregate Supply (AS) Side Model analyses the impact of the acceleration of Ireland’s roadmap for exiting the Coronavirus lockdown. Consider the impact of this on the three macroeconomic objectives of the government. Include a diagram in your answer.
Select ONE another concept from the following to analyze the case study: