Demand Stories 2020
In each scenario you are given an event/situation and a market. Explain how the action of the event/situation will affect the demand in the market.
Draw the following four graphs in your notes and link each scenario.
Password for answers:
Shift Right:  |
Shift Left:  |
Extension:  |
Contraction:  |
- Situation: EasyJet is ‘hanging by a thread.’ Since the beginning of 2020, the airline is struggling to control costs during the covid-19 pandemic. Market: EasyJet flights. Link: www.bbc.co.uk/news/business-54303379 Click for answer
- Situation: The Eat Out to Help Out scheme sold 100 million meals in August 2020. This scheme put a 50% discount on meals eaten in restaurants. Market: Meals in restaurants. Link: www.bbc.co.uk/news/business-54015221
- Situation: The Eat Out to Help Out scheme sold 100 million meals in August 2020. This scheme put a 50% discount on meals eaten in restaurants. Market: Taxi services. Click for answer
- Situation: Tesco joins Morrisons to limit sales of flour, dried pasta, toilet roll, baby wipes, and some wet wipes. Market: These items. Link: www.bbc.co.uk/news/business-54294575 Click for answer
- Situation: “Shoppers warned to buy early for Christmas.” With three months to go before Christmas, the online retail industry is gearing up. It's warning that firms may struggle to cope if we leave all our festive shopping till the last minute. "We think the volumes are going to be really very excessive this year," said Andy Mulcahy from IMRG, the industry body for online retailers. "Whilst that in itself is not a problem, getting too much of it too close to Christmas is going to be a bit of a problem," he said. "If you can spread out your shopping and do quite a lot of it in November, maybe even a bit of it now, then that would really help." Market: Online shopping between September and Christmas 2020. Link: www.bbc.co.uk/news/business-54287282 Click for answer
- Situation: The price of gold reached record highs in the year 2020. Market: Gold. Link: www.bbc.co.uk/news/business-54230737
- Situation: “Thousands of Retail Jobs Unviable.” The lockdown has made a permanent shift for consumers in favour of online shopping. Market: The market for city-centre retail. Link: www.bbc.co.uk/news/business-54289780 Click for answer
The pandemic has made fewer people want to travel by air at any given price level. During lockdown, it was impossible to fly. Over the summer, many travellers were put off due to facing possible quarantine rules when they return. This has led to demand falling for the airline, shifting its demand curve left.
Click for answer
The government paying to reduce prices by 50% is a change in price. The lower price causes an extension in demand.
Assuming that taxi services and eating out in restaurants can be considered complementary goods, the fall in price of restaurant meals will lead to a shift right in taxi services.
As the UK hears news about rising numbers of covid-19 cases, people are starting to panic buy certain household items. This means that at any given price, more will be demanded by consumers, shifting demand for these items to the right. Note how these grocery stores limiting the items is not a way to suppress demand, but rather to ensure that all customers can purchase these items, given the short-term inelasticity of the supply.
With this being the first Christmas shopping season since Covid-19, online retailers are expecting there to be a surge in demand for their services before Christmas. This surge in demand will shift the demand curve for online shopping to the right. You could argue that by making this statement, the online retail industry is hoping that they can push up demand in September in order to see that demand falls closer to Christmas. This is because they expect that the demand just before Christmas to overwhelm their distribution systems.
Click for answer
The uncertainty of 2020 has meant investors want something that they think will retain value. This means that more people around the world want gold in all its forms. This will mean more people want it at any given price, which will shift demand for the product to the right (and hence push up its price).
2020 and the lockdown have changed people’s spending habits. People are now more used to shopping online. More people are working from home. At any given price there are fewer people willing to go shopping, meaning the demand for shopping has shifted to the left.
When finished: look through the news to find an example and write your own scenario.
Click to clear all answers