Answer to Question #175063 in Microeconomics for Lebo Letsoalo

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 Covid-

19 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

1.1 Using two (2) separate graphs, explain how the market for soft drinks

will be affected by the issues mentioned in the case study. (16)

1.2 Mention two (2) other factors that can cause each of the changes

identified

Answer 1

1.1 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.

1.2 Due to widespread business closures, especially in lower income populations, national economies are expected to contract, leading to a dramatic rise in unemployment and poverty rates.

The loss of jobs and income is likely to result in reduced ability to access healthcare and a nutritious diet.