Answer to Question #172637 in Microeconomics for Celine

Question

The widespread effects of the Covid-19 pandemic have been devastating and economically disruptive in South Africa. Covid-19 has defied what is deemed to be ‘normal’ in terms of conducting business. It is clear that the threat of Covid19 has affected the production of many commodities due to the stringent measures that have been put in place to contain the virus. The soft drink industry has almost come to a standstill. Most economic and social commentators feel that the Covid-19 pandemic effect on the economy is going to exacerbate widespread poverty, in an economy that is already highly unequal, as firms downsize, and people lose their source of income. Using two (2) separate graphs, explain how the market for soft drinks will be affected by the issues mentioned in the case study

Answer 1

In the market for soft drinks the supply of soft drinks will decrease as a result the issues mentioned in the case study, so the equilibrium quantity will decrease and equilibrium price will increase.