COURSE: BUSINESS ECONOMICS

PROJECT: COVID-19: The Global Shutdown

Instructions for the submission:
● Please maintain the following: Font - Times New Roman, Font Size - 12, Line Spacing -
1.5

Name E. Tejas Sai Kumar

Question 1

 The Fall in demand and price made OPEC decide to cut the oil supply.
 The desired outcome of this decision was to retain the levels of profits which they
previously had and to increase oil price which has fallen to negatives due to record
surplus.
 Because of the record fall in oil demand, the demand curve would shift to the left and
the supply curve would remain the same since, the decision to cut the supply was not
made. This would lead to fall in the price.
 After the decision to cut the supply, the oil price would slightly increase however, it
will not be equal to before the pandemic. The supply curve will shift and the new
equilibrium increase the price and slight rightward shift in the demand curve towards
the end of the year.

 OPEC operates in an Oligopoly market Structure.

 The 3 features of Oligopoly market are;
I. The exact same product, produced by few sellers.
II. Sellers have high bargaining power.
III. Entry is restricted because of existing big firms.
Question 2

 The business was producing 92 articles.

 The total profit was 2500.
 To reach at profit maximizing output,
 First identify fixed and variable cost and add both to arrive at Total
Cost for each level of output. Calculate Marginal Cost at each level
by dividing Change in Total Cost by Change in Output.
 Identify Revenue at each level by multiplying price of each article
and number of articles.
 Calculate Marginal Revenue at each level by dividing Change in
Revenue by Change in Output.
 Subtract Marginal Revenue and Marginal Cost to arrive at change in
Price.
When the Change in Price, at a certain output level reaches 0 i.e., MC is equal to
MR, it will be the Profit Maximizing Output.

 4 Journalists.
 The new Profit is 1500.
 Earlier Profit is maximized by hiring 8 and now Profit is maximized by hiring 4 and
profit is maximized were MC=MR. So, by continuing to hire these 4 additional
journalists, the firm will make loss and the firm does not want that to happen. So, we
fired these 4 journalists.
Question 3

 The type of unemployment a county like India would experience from such a pandemic
is Cyclical Unemployment.
 Because majority of Indian population still works in Informal Sectors like car repair,
labors, domestic workers and grocery stores. Because it is unregulated and not
covered with any contract, such a pandemic can leave these workers out of jobs. When
Prime Minister had imposed total lockdown, the small shop owners and small business
suffered a shocking fall in their income leading to letting go most of the employees. A
small short term recession lead to fall of aggregate demand. Consumers spending
became limited due to the uncertainty. This increased unemployment in daily wage
workers, travel agencies, domestic helps until the later part of the year when lockdown
was slowly lifted and business slightly regained its market. Considering this pandemic
is short run, the unemployment faced due to this pandemic was Cyclical.

 The type of recession that would cause in such a pandemic is Demand-led recession
 Household Consumption, Government Spending, Investments and difference between
Imports and Exports includes the aggregate demand in an economy. The pandemic
created a situation of unrest worldwide due to virus being unknown and deadly. The
lockdown was necessary and helpful as it was disrupted income for majority of the
population. Due to the lack of income and unemployment, the demand and spending
limit also reduced leading to fall in aggregate demand. When the aggregate demand
falls it also reduces the country’s GDP. Consumers and Investors wanted to hold on to
the money rather than spend shortening flow of money in the economy. So. This
pandemic is a Demand-led recession.
Question 4

 The type of Macroeconomics steps Indian government should take after the crisis
created by such a pandemic is Expansionary Fiscal Policies.
 The two policy measures that to be taken is
 Taxation
 Government Expenditure
Lowering tax directly helps consumers with more money in hand for
expenditure. This is a famous method that is applied by many democratic
countries in the time of crises and recession.
In a country like India, where more than half of the population was
unemployed after the lockdown. So, the government should introduce relief
programs like providing unemployment compensation to farmers, daily
wage workers, free travel, migrants with no job, providing minimum
healthcare facility and control basic medical charges.

 The type of Macroeconomics steps Reserve Bank of India should take after the crisis
created by such a pandemic is Monetary Policies
 The two policy measures that to be taken is
 Reduce Interest Rate
 Influx Money
The Government should reduce interest rate on borrowings to allow
consumers to take loan and spend the same again to increase the demand
and the flow of money in the market. It should also relive farmers and
daily wage workers of some part of their loan, allowing delay in loan
repayments by unemployed population and small businesses.
Influx money in the economy by purchasing government bonds so that
population has more money in hand to influence than to create demand
and spend.