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TABLE OF CONTENT

TITLE PAGES

QUESTIONS AND ANSWERS :

i. Market for Face Masks during a Sudden Increase 3

in Covid-19 Cases
ii. Impact on the Market for Surgical Gloves due to
5
Top Glove's Temporary Shutdown
iii. Impact on the Market for Surgical Gloves with
7
Government Subsidy

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 ECONOMICS FOR BUSINESS DECISIONS
ECO745
Case Study Assignment 1
Total Marks: 30
Due Date: 19 November 2023

Name: ID:
SUMAIRAH MAIZA BINTI SHAHIDAN 2023768339
NUR ANISHA IZZATY BINTI ZAKARIA 2023360361
AZURA BINTI MD RADZI 2023120417

QUESTIONS:

i. Market for Face Masks during a Sudden Increase in Covid-19 Cases (10
Marks):

a. Diagram Explanation: Using a labeled diagram, illustrate the shifts in the supply
and demand curves in the face mask market during a sudden surge in Covid-19
cases. Highlight the changes in equilibrium price and quantity.

Price, P S1

Supply, S
S0
P1 E1

PO E0

D1

Demand, D
D0

Quantity, Q
Q0 Q1

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When demand for face masks is increase, the demand for price and quantity also
increase. Demand shifts to the right. Prices increases fro P0 to P1 and quantity
increase from Q0 to Q1.

b. Strategic Business Idea: As the General Manager of XYZ Glove Company,

propose a strategic business idea to the CEO based on the surge in Covid-19 cases.
Consider factors such as production capacity, market demand, and potential
innovations. Explain how your suggestion aligns with the company's long-term goals
and market dynamics.

Answer :
The face mask industry in Malaysia is growing and receiving high demand from
international and domestic markets. As the Covid-19 pandemic hit the world, the
drastic demand for face masks around the world rose to a high level. This is because
huge demand for health care. So there is a huge opportunity for face mask
manufacturers to improve their production and produce more face masks to meet
market demand. So as the General Manager of XYZ Glove Company, it should be
wise to take this opportunity because the demand for face masks is very high at that
time.

Production Capacity.
The General Manager should recruiting more workers to cope with the expansion of
production lines to increase productivity. Due to glove manufacturing sector is a
labour intensive industry, it requires sufficient human resources to run the production
and carry out the operation process.

Market Demand.
The General Managers can consider to build new production plants and expand its
production lines due to high glove demand from worldwide markets. They can
bought land and planned to expand its production plants. Due to setting up new
production plants requires huge amount of capital and human resources, this need to
be planned strategically and taken into account carefully.

Potential Innovations.
The General Manager must focusing on the face mask high quality and achieve zero
defect in production. To achieve high quality production, the manager needs to bring
in high technologies and advanced machines in production, such as automatic
machines, computer programming machines, robotics and artificial technologies in
production.

With the efforts and commitments from the management team and the employees,
the XYZ Company are expected to achieve another higher level of success in
company long term goals and market dynamics.

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ii. Impact on the Market for Surgical Gloves due to Top Glove's Temporary
Shutdown (10 Marks):

a. Diagram Explanation: Employ a diagram to visually represent the consequences

on the market for surgical gloves when Top Glove, a major manufacturing firm in
Malaysia, temporarily shuts down due to a significant number of workers contracting
Covid-19. Clearly depict the shifts in supply and the resulting impact on equilibrium
price and quantity.

a) Price
S1

S0

P1 E1

P0 E0

D0

Quantity

Q1 Q0

When the manufacturing company shut down the businesses, the supply curve will
shift to the left which can cause the quantity of the product decrease from Q 0 to Q1.
The price of product will increase from P0 to P1.

b. Suggestions for Top Glove Management: Assume the role of the Manager of
Top Glove and provide strategic suggestions to the top management to mitigate the
losses during the temporary shutdown. Consider options such as diversification,
supply chain adjustments, or communication strategies. Explain the rationale behind
your suggestions and their potential effectiveness.

Answer :
Diversification – expending the product lines to attract new customers and expend
the markets through diversifying products to draw in alternative consumer

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demographics. For example, can start produce hand sanitizer by using machine and
lesser worker needed.

Supply chain adjustment – since Top Glove is manufacturing surgical glove in

Malaysia will temporary shutdown the business due to significant number of workers,
keeping buffer stocks or safety stocks may help to maintain quantity available in the
market for customer to purchase the product thus help to reduce the losses to the
company.

Communication strategies – communicate regularly with workers regarding plan and

action to avoid losses. Monitor the progress and make sure that the workers involved
in the decision-making process. Always hear their voice and idea so that they feel
they participate in business management. It could helping management to be
effective in handling and managing the problem and losses.

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iii. Impact on the Market for Surgical Gloves with Government Subsidy (10
Marks):

a. Diagram Explanation:
Develop a new diagram illustrating the effects on the market for surgical
gloves when the government provides a subsidy to manufacturers. Clearly
depict how the subsidy influences supply and demand and discuss the
resulting changes in equilibrium price and quantity.

Price

S
0 S1
1

P
0
P1
1 D1
D
1 Qty

Q Q1
0
1

1. Decrease in price of inputs reduces the cost of production for surgical

gloves due to government subsidies.
2. Demand and Supply shifts to the right,.Price decreases from P0 to P1 and
Quantity increases from Q0 to Q1.

b. Analysis of Government Subsidy Impact:

Evaluate the potential impact of the government subsidy on the market for
surgical gloves. Discuss how this intervention might affect producers,
consumers, and overall market dynamics. Provide insights into the possible
long-term consequences and consider any unintended effects.

Answer:-
Government subsidy on surgical gloves would likely have several direct
effects on the market. Firstly, it would lower the production cost for producers,
as they would receive financial assistance from the government. This
reduction in cost could lead to a decrease in the price of surgical gloves, as
producers may pass on some of the cost savings to consumers.
Consequently, the subsidy might stimulate demand for surgical gloves as they
become more affordable.

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 In the short term, the subsidy would benefit both producers and consumers.
Producers would receive financial support, which could help them maintain or
expand production capacity. Consumers would benefit from potentially lower
prices, making surgical gloves more accessible. However, in the long term,
some downsides may emerge. Producers might become reliant on the
subsidy, potentially hindering their ability to innovate or adapt to changing
market conditions. Consumers may also become accustomed to lower prices,
making it challenging for producers to adjust prices in the absence of the
subsidy.

The government subsidy could lead to shifts in market dynamics. With lower
production costs, producers may be incentivized to increase supply, leading to
an expansion in the quantity of surgical gloves available in the market. This
could potentially lead to increased competition among producers, putting
downward pressure on prices. The increase in demand due to lower prices
might further stimulate competition and market growth. However, if the
subsidy is only granted to certain producers, it could create an uneven playing
field and potentially distort market equilibrium.

Unintended consequences are possible with any intervention, including

government subsidies. One potential unintended consequence is market
distortion. If the subsidy is not carefully designed, it could create artificial
profitability for producers, leading to oversupply and potential waste of
resources. Additionally, if the subsidy is not properly targeted, it may benefit
large producers more than smaller ones, potentially leading to consolidation in
the market. Another unintended consequence could be inefficiencies in
resource allocation, as the subsidy might discourage producers from seeking
cost-effective alternatives or exploring new technologies.

Overall, while government subsidies on surgical gloves can provide short-term

benefits to both producers and consumers, there are potential long-term
consequences and unintended effects that need to be carefully considered. It
is crucial for policymakers to design and monitor such interventions to ensure
they are effective, equitable, and do not disrupt market dynamics or create
inefficiencies.