FUNDAMENTALS OF ECONOMICS

(ECO 162)

HAND SANITIZER

GROUP OF CLASS: AC1101D

NAME OF GROUP: GROUP 3

NO. NAME STUDENT ID

1. IZZARA BATRISYA BINTI YAHAYA 2020858144
2. NAJWA SAFIYYAH BINTI IZUDDIN 2020858684
3. NURUL IZZAH QISTINA BINTI RUSLAN 2020478614
4. FARISYHA NAJWA BINTI HAIRUL ANUAR 2020833592
5. AISYAH ALLYSYA BINTI MOHD NAZRUL 2020833166

PREPARED FOR: SYAMSUL IKRAM MOHD NOOR

DATE OF SUBMISSION: 14 JANUARY 2021

 ACKNOWLEDGEMNET

We are really grateful because we managed to complete our Fundamentals of Economics

(ECO162) assignment within the given time. This assignment could not be done without the
cooperation of our group members.

We would like to express our sincere gratitude to our lecturer, Encik Syamsul Ikram
Bin Mohd Noor, who gave us this golden opportunity to do this group assignment. He has
helped us a lot in the completion of this assignment. We learn so many new things while doing
this assignment. We are grateful for providing such a nice support and guidance.

We also want to convey our gratitude to Allah the Almighty who always guide and light
our way in our study. We would like to express our gratitude towards our parents and members
of families for their kind cooperation and encouragement which helps us in the completion of
this assignment. Last but not least, we would like to thank our friends for support and
willingness to spend time with us during the completion of this assignment.

Thank you to all who helped us throughout the process of the project. Without all of
these people we would have to face so many difficulties to complete this assignment.
 TABLE OF CONTENTS

CONTENT PAGE

INTRODUCTION 1

CHAPTER 1: INTRODUCTION TO ECONOMICS

1.1 Basic Economic Concept 2

1.2 Basic Economic Problems 3-4

CHAPTER 2: DEMAND AND SUPPLY

2.1 Demand and Supply of Hand Sanitizer 5

2.2 Determinants of Demand 6

2.3 Determinants of Supply 7-8

2.4 Classification of Goods 8-9

CONCLUSION 10
INTRODUCTION

In early 2020, the outbreak of the Novel Coronavirus or COVID-19 has been spread
throughout the world including our country, Malaysia. Because of this pandemic, hand sanitizer
sales began to grow. On 11 March, the World Health Organization (WHO) officially upgraded
the outbreak to a global pandemic. Health sector and agencies around the world, recommended
that people refrain from touching their faces especially eyes, mouth and nose. They also
recommended to always wash and clean their hands using hand sanitizer after touching public
surfaces such as handrails and public phones.

In late January 2020, the virus was confirmed have reached Malaysia. It was detected
on travellers from China arriving in Johor via Singapore on 25 January, following the outbreak
of COVID-19 in Hubei, China. When the local cases increasing and began to make headlines,
disinfectant liquids and hand sanitizers, has been in high demand in Malaysia as society
prepared for the worst.

The coronavirus has created a desperate need for many products including hand
sanitizer. Hand sanitizer is a product that currently in huge demand and massive growth is
forecast in the coming years. Alcohol-based hand sanitizer have proven to be effective in killing
human disease cause by pathogens. For example, bacteria, viruses and fungi. Most of the
people prefer hand sanitizer to prevent infectious diseases, especially during the COVID-19
pandemic. This has caused an increased demand for the product. Another factor driving the
growth in the market is the increase in awareness about personal hygiene among the people.
Hand sanitizer manufacturers in Malaysia are increasing their production to satisfy the need of
both the local and global markets.

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CHAPTER 1: INTRODUCTION TO ECONOMICS

1.1 Basic Economic Concept

i. Scarcity
The outbreak of COVID-19, hand sanitizer has been in high demand from the society
to satisfy their unlimited wants of hand sanitizer. People have unlimited wants, but the
resources available to satisfy those wants are limited. Local manufacturers of hand
sanitizer and disinfectant told CNA (Channel New Asia) that even though orders have
increased to 5 times, they could not produce more when they can’t lay their hands-on
ethanol which is the main ingredient to sterilise the microbes, as well as plastic bottles
and bottle accessories. According to local manufacturer, MyMedic, they said that it is
not just ethanol, even the bottles are in short supply said Mr Mohd Farkhan Damri a
senior executive of MyMedic. He also said that the materials are extremely limited
because most of them are sourced from China.

ii. Choice
The firms are lack of production factors such as machine to produce the hand sanitizer
or the bottle to fill the liquid. Because of scarcity, the firm must make the best choices
to choose what to produce to get more profit. In this outbreak era, the firm produce
goods that needed to prevent COVID-19 is the most growth in the market. For example,
if the firm want to produce more of hand sanitizer, so the less money the firm have to
spend on produce other goods. The firm have to make the best choice to maximize their
profit on hand sanitizer.

iii. Opportunity Cost

Opportunity cost occurs when the quantity of one goods given up for a unit of another
goods that is consumed or produced. For example, if the firm such us Dettol want to
produce more Dettol hand sanitizer, than the other goods which is Dettol bar soap will
be a good forgone. So, the society will tend to buy the hand sanitizer than the bar soap
because nowadays people rarely to use the bar soap.

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1.2 Basic Economic Problems

The problem of scarcity for hand sanitizer in the economy will results in society to resolve
three fundamental economic problems.

What to
produce and
How much
to produce? How to produce?

For whom to
produce?

1. What to Produce and How Much to Produce?

The demand for hand sanitizer this year is higher than the past years since the Pandemic
Covid-19 spreads all over the world. All the company that involves in the health and the
business sector will take this chance to maximize their profit. The answer for what to
produce in this outbreak era is supplier will produce a large output of hand sanitizer based
on demand of society and all the resources in economy that involve in a transformation of
hand sanitizer. The answer for how much to produce on this outbreak era for hand sanitizer
is based on the demand of the society and all the resources in economy such as
Tetrahydroxy propyl Ethylenediamine and Propylene Glycol. For example, in United
Kingdom they will produce a 1000000 hand sanitizer for a month to help solve the problems
of scarcity.

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2. How to Produce?

How to produce are depends on method or technique to produce the hand sanitizer to all
the consumers. For example, most of the companies in the world will use the capital-
intensive methods in this Pandemic Covid-19 because of the higher demand of hand
sanitizer. They will improve the level of the technology to supply more hand sanitizer such
as using a high technology machine to protect hygiene of the bottle and can be produce
more hand sanitizer in one month. The choices of this method are depending on relative
prices between labor-intensive method and capital-intensive method and the most efficient
production.

3. For Whom to Produce?

The answer for whom to produce for hand sanitizer is based on the distribution of income
in society that be the target of the company or the purchasing power of society. The society
that has a higher income will buy more hand sanitizer and the society that have a lower
income will buy less hand sanitizer. For example, Dettol hand sanitizer is costing RM18.24
for 200 ml, the higher income society will not have a problem to have the hand sanitizer in
this Pandemic Covid-19 meanwhile the lower income will have difficulty to buy more hand
sanitizer.

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CHAPTER 2: DEMAND AND SUPPLY

2.1 Demand and Supply of Hand Sanitizer

The global hand sanitizer market is expected to grow at a Compound Annual Growth
Rate (CAGR) of over 17% during the period 2019-2025. The introduction of fragrance-
based hand sanitizers is one of the major factors responsible for the growth of the global hand
sanitizer market. Vendors have started investing in developing fragrant variants of hand
cleansers. This innovation has offered positive dividends and has boosted the market growth.
The market is also witnessing an influx of bio-based or organic ingredients in hygiene products
in several countries. People are getting aware of the ill-effects of chemical-based hand rubs.
Therefore, they are displaying a keen interest in purchasing organic or chemical-free hand gels.

The rise in hospital-acquired infections (HAIs) and the outbreak of pandemics such as
COVID-19 have influenced the growth. The market landscape of hand hygiene products has
drastically changed since the outbreak of COVID-19. The average market demand across the
globe is likely to witness a phenomenal rise of over 600% during 2020. The increasing demand
for sanitizing solutions along with preventive recommendations by WHO is expected to fuel
the market growth. However, the YOY analysis suggests that the spike is not likely to exist for
more than two years provided the outbreak is controlled in the upcoming months.

Regionally, the global hand sanitizer market covers North America, Latin America,
Europe, East Asia, South Asia, Oceania and the Middle East and Asia. Among these regions
North America and Europe currently lead the market. A key factor to consider here is that
people in the developed countries are highly aware about hand hygiene and considerably
increase in positive cases of COVID-19 disease in the US and states in 2020. Countries in East
Asia and South Asia however offers substantial growth opportunities to the market.

Rise in government initiative to create awareness among people, increasing production

capacity of alcohol base hand sanitizer by providing licenses to sugar industry, distilleries, and
new manufacturers for production of hand sanitizers to meet growing demand. Also, growing
distribution of hand sanitizer in hospitals and health care facilities to fight against Covid-19
pandemic is positively influencing growth of the global hand sanitizer market.

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2.2 Classification of Goods

There are many types of goods. Therefore, goods can be classified into different categories
based on their distinctive characteristics; from responsiveness of quantity demanded to price
charge (s), to income change, to change of price of other goods, and so forth.
Under economics, goods are categorised into the following three groups:

ECONOMICS: TYPES OF GOODS

FREE GOODS ECONOMIC GOODS PUBLIC GOODS

Hand sanitizer is an economic good. Economic goods are limited in supply and they are man-
made goods. They require effort to be produced and involve cost of production. Thus,
consumers have to pay for the goods. Hand sanitizer is also a non-perishable good as it cannot
last long. The product must be produced from time to time.
Goods according to the Islamic economics perspectives can be classified into few categories
according to hierarchy of needs:

ISLAMIC ECONOMICS: TYPES OF GOODS

DHARURIYYAH HAJIYYAH KAMALIYYAH TARAFIYYAH

Hand sanitiser is a hajiyyah good which is a comfort good as it provides comfort to human
beings. Without hand sanitiser, humans now cannot use them in this pandemic to sanitise their
hands. Humans’ day-to-day existence would be less comfortable without having hand sanitisers
with them.

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2.3 Determinants of Demand

1. Price of hand sanitizer itself (movement along curve)

Demand Curve of Hand Sanitizers

400
350
300
Price ('000) (USD)

250
200
150
100
50
0
0 10 20 30 40 50 60 70 80
Quantity ('000)

Figure 1.1

As shown in the figure 1.1, if price of the hand sanitizers increases from 150,000 USD
to 250,000 USD, the quantity demanded will fall from 50,000 units to 30,000 units. The
increase in the quantity demanded is known as expansion in demand.

If the price of hand sanitizers decreases from 350,000 USD to 250,000 USD, then the
quantity demanded will increase from 10,000 units to 30,000 units. The decrease in the quantity
demanded is known as constraction in demand.

2. Consumers’ expectations of future price:

As news of the outbreak spread across the globe, people started to panic. This led to panic
buying as people started to stock hand sanitizers to keep themselves safe from the virus.
This causes a bigger impact of demand for hand sanitizer. The consumers expect that in
the near future prices of the goods would rise. If one speculates that the price of the hand
sanitizer will increase in the near future, consumers will buy more sanitizer now to avoid
paying more later. Hence, the demand for the Hand sanitizer will increase and this
situation may shift the demand curve to the right.

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 3. Number of potential consumers or Market size:

A higher number of buyers in the market will lead to an increasing in demand, causing the
demand curve to shift to the right. Consumers nowadays are shifting rapidly towards
alternate products, namely, hand washes after the news of the virus outbreak in China and
it’s causes a steady demand for hand sanitizer. This had led to increasing in the number of
potential consumers around the world.

4. Consumers’ Preference:

Preference or tastes is influenced by the types of advertising or information that the

consumers get. The impacts of Covid-19 have produces many advertising on the awareness
of the importance of Hand Sanitizers around the world. This will lead to an increase in
demand and will shift the demand curve to the right.

2.4 Determinants of Supply

1. Price of the hand sanitizer itself (movement along a supply curve)

Supply Curve of Hand Sanitizer

400
350
Price ('000) (USD)

300
250
200
150
100
50
0
0 10 20 30 40 50 60 70 80
Quantity ('000)

Figure 2.1

The change in quantity supplied is shown by a movement along the same supply curve.
If the price of the hand sanitizer increases from 250,000 USD to 350,000 USD, the quantity
supplied also increases from 50,000 units to 70,000 units. The increase in quantity supplied is
known as expansion in supply.

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 When the price of hand sanitizer decreases from 250,000 USD to 150,000 USD, the
quantity supplied also decreases from 50,000 units to 30,000 units. The decrease in the quantity
supplied is known as contraction in supply.

2. Level of technology

Higher level of technology levels allows a smaller quantity of resources to be used for
production of hand sanitizer, which in turn reduces the cost of production. This thus
increases the supply of hand sanitizer by shifting the entire supply curve rightwards.

3. Government or economic policy

Government policies consist of taxation and subsidies. Report in Burlington on January

1, 2021, distilleries that switched to making hand sanitizer this year got some good news
on New Year’s Eve, they won’t be taxed by the feds. On Thursday, the federal
government rescinded a $15,000 fee it charged the distilleries earlier this week. The
Department of Health and Human Services said the fee was charged by mistake. Several
distilleries in the region began making sanitizers after supplies of important product
became scarce in March. When the production of hand sanitizer is not taxed, this decreases
the cost of production and increase the amount of profit earned. This will lead to a increase
in supply and the entire supply curve shifts rightwards.

4. Number of suppliers

With more suppliers, more hand sanitizers can be produced in the market. Supply will
increase and hence, the supply curve will shift to the right. There have been many suppliers
from all over the world since this Coronavirus outbreak hit the world.

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CONCLUSION

The conclusion from completing this ECO162 Assignment, we get the knowledge that
when COVID-19 spreads all over the world, the outbreak has created a sudden demand for
hand sanitizer among hospitals, businesses and personal consumers. The shortage has led many
businesses to shift their operations quickly to meet the demand in the market. People want to
get the product that will protect them from getting that dangerous virus. So, the most common
product that people all over the world want is hand sanitizer to prevent them from being
infected by the Coronavirus.

All the company that produces hand sanitizer will take this chance to sell their hand
sanitizer and maximize their profit besides minimize the cost. As we can see that demand for
hand sanitizer at this outbreak era is getting higher than the past years. They will also take this
chance to supply more hand sanitizer using all the resources that their company have. Because
of this pandemic situation, this are their chance to maximize profit. They can sell the product
at the higher price and people will still buy the product.

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REFERENCES

Beroe Inc (2020), COVID-19 Outbreak - Impact On Hand Sanitizer Market. Retrieved from:
https://www.beroeinc.com/blog/covid-19outbreak-impact-on-hand-sanitizer-market/

BH Online (2020), Kronologi COVID-19 Di Malaysia. New Straits Time. Retrieved from:
https://www.bharian.com.my/berita/nasional/2020/03/666122/kronologi-covid-19-di-
malaysia

Eastern Daylight Time (2020), Hand Sanitizers and COVID-19 - How is COVID-19 Impacting
Demand in the Alcohol-based Hand Sanitizer Market, Retrieved from:
https://www.businesswire.com/news/home/20200605005193/en/Hand-Sanitizers-and-
COVID-19---How-is-COVID-19-Impacting-Demand-in-the-Alcohol-based-Hand-Sanitizer-
Market---
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0contribute%20to,%26%20Organic%20Hand%20Sanitizers%20Growth%20in%20Promotio
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Future Market Insights (2020), Hand Sanitizer Market. Retrieved from:

https://www.futuremarketinsights.com/reports/hand-sanitizer-market#idSMPREP

Vincent Tan (2020), Malaysia’s Hand Sanitizer, Rubber Glove Manufactures In Overdrive As
Demand Spikes Over COVID-19 Fears. CNA Asia. Retrieved from:
https://www.channelnewsasia.com/news/asia/malaysia-coronavirus-covid-19-sanitiser-
gloves-manufacturers-12450290

WCAX News Team (2021), Distilleries won’t be taxed if they made hand sanitizer. Retrieved
from:
https://www.wcax.com/2021/01/01/distilleries-wont-be-taxed-if-they-made-hand-sanitizer/