Question
The World Health Organization reported that face mask demand is up by a multiple of 100 and prices, by 20. At 20 million, the number
The World Health Organization reported that face mask demand is up by a multiple of 100 and prices, by 20. At 20 million, the number of face masks China can produce e ach day needs to double. Correspondingly, a Bloomberg Opinion writer reported on January 31 that CVS, Lowe's, Staples, and even Amazon had sold out of CDC recommended N95 air filtration face masks.
Elsewhere, in Hong Kong, panic buying provoked a mixed rea ction. While prices for masks were way up, some pharmacies were distributing them for free. One "citizens group" even secured financing and bought a mask making machine.
Hoping to increase their capacity, they want to sell a cheap mask. The response in Lao s was a ceiling on mask prices. The government said price hikes were illegal and sellers would be monitored. Asked about production , they "encour aged" manufacturers to boost supply .
(Schwartz, 2020 )
a) Based on the article above, use suitable diagram(s) for mask market, explain why price rise when there are shortages and fall when there are surpluses.(10 marks)
b) Discuss the introduction of price ceiling policy by a government would solve the problem of scarcity in the economy.
(10 marks)
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