What Is All The Fuss About The Economy And Covid-19?

17th November 2019 – the world experienced its first novel coronavirus case, completely unaware of the horrors curling behind the curtains; The horrors which will cease the world in a manner it had never experienced. The horrors which will spread like an ivy vine pushing every corner of the world into its trap. 

About Covid-19 in the pretense of supply chain

Novel coronavirus, popularly referred to as Covid-19, is a highly communicable and infectious disease caused by the newly discovered virus called coronavirus. Because of its high communicability, the operations were forced to cease as when fewer people interact, there will be fewer chances of its spreading, eventually oppressing and finally destroying it. This obvious chain of action to defeat was understood by all the messianic minds across the planet, and thus some of them obliged the public while others voluntarily asked to follow up.

Because of the measure by government, a sense of fright was created among the public, who initially began to carefully select the commodities to purchase, thereby choosing only the necessary ones causing a decline in the demand for unnecessary goods. However, as the public understood the depth of the situation, they reverted to the modern mode to fulfill their demands hence giving an uprise in the online demand.

Business closures due to COVID-19 could cost U.S. trillions in GDP

How has it affected the supply chain?

Moreover, according to the basic concept of the market, it requires the presence of both buyers and sellers to operate. Imagine the absence of any of the two, it will by all means force stop the working and that’s what exactly happened. The whole economic chain got haphazardly shaken to its very core. For the demand to exist we require the willingness of the consumer along with his ability to spend but due to reduced working in the economy, the income level of many sellers got stoop down who were consumers to a different set of people hence affecting their income. 


The disruption in the supply chain could be understood more easily with the help of the following example:

Imagine an internal economy with two individuals A and B. Mr. A is in the shoe manufacturing business. He exports raw material from China but due to the inter-nation lockdown he couldn’t anymore. This disrupted his production. Since he couldn’t produce more, he couldn’t trade, which will reduce his income at the individual level. Mr. A will be a consumer to Mr. B who carries cloth manufacturing business. Since a sudden plunge in Mr. A’s income, his ability to buy clothes from Mr. B will reduce, affecting his income. This example explains two scenarios: how the global demand has been affected due to lockdowns and secondly, how the domestic demand plummeted.

Furthermore, due to the government’s import substitution policy, like the early days rushing back, consumer falls into a deeper pit hole which gives rise to the contracted basket of options to choose from, thus giving rise to expanded internal monopolies stimulating the aches of consumers.

At the job level, as the overall production had slowed down, the individual income halved, giving rise to MPS i.e Marginal propensity to save and pushing the whole economy into unforeseen recession.

We have entered into a vicious circle of low demand and low income. As to overcome this, the economies have announced measures of putting more currencies into circulation to stimulate consumer spending in the economy. Also, in various countries, the apex banks have declared the decline in several rates, thus making it easier to take loans, infusing money into motion.Conclusion

To conclude, this virus has lead to stagflation giving rise to all major hitches inflation, unemployment, and slow economic growth. On a positive outlook, it has helped us deal with problems we haven’t even thought about before and has proved that humans can survive everything to get through the unfortunate phase of life.

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