1.) Motorcycles and bicycles are substitutes under demand. The following questions relate to the bicycle market.

1.1 Explain how a decrease in the price of motorcycles will affect the demand for bicycles.

1.2 Draw a graph that supports the statement in Q.2.1.1 above.

2.) Advise on the process to be followed to eliminate market disequilibrium in the economy, in the following two cases (each case treated separately):

• The COVID19 spread has created panic buying from customers,
• If, after the economy lockdown, firms receive subsidies from the government to produce consumer goods and services.