Imagine that the restaurant sector in Qatar functions as a perfectly competitive market; with all restaurants having identical cost structures and that all restaurants rent their physical space by signing 2-year contracts. Assume that the market is in the long-run competitive equilibrium, with restaurants making zero economic profits.

a)Now imagine that Covid-19 and the health protocol measures put in place have caused a leftward shift in the demand curve for the sector. Using concepts seen in class, explain in detail how these health measures will affect the restaurant sector. Make sure your explanation includes how this affects the market as a whole as well as individual restaurants. You must include figures to represent these changes.

b)Imagine that the government passes a decree that exempts restaurants from paying rent for 3 months: do you think this measure is properly targeted to reduce firms from shutting down in the short run? If not, how could it be improved?