Macroeconomic & Microeconomic Impacts of COVID-19 Assignment Sample

Introduction of Macroeconomic & Microeconomic Impacts of COVID-19 Assignment

Economics is a branch of study which relates to the study of scarcity and the way how people are using resources well for effective decision-making. For the successful working of the business and the countries, all the economic aspects of the company must be analysed and evaluated well. Concerning the current economic state, COVID-19 is the major change which has brought many changes in the economic condition of the countries and the whole world economy as well. It has created huge economic losses for the companies and as a result, many businesses all over the world have shut down. The current essay will evaluate the economic impacts of COVID-19. Moreover, it will also discuss the application of the different principles and theories of economics.

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Main Body

Macroeconomic impact of COVID on the country

Macroeconomics is defined as a branch of economics which deals with studying the economy as a whole. It studies the factors like the GDP, national income, economic growth and many other different types of factors. Further, the COVID-19 pandemic was a contagious disease which spread in the year 2019 and it was caused by the SARS-CoC-2 virus. It was an issue which was faced by the world economy and many different negative economic impacts were created on the whole economy. Whether the economy was developed or developing or even under-developed it created a negative impact on the working of the country. Overall according to the statistics, the world witnessed a decline of 6.7 % in the GDP from 2019 to 2020. In addition to this the GDP, and the mortality rate within the country was also 75 % higher in comparison to the previous years (GDP and events in history: how the COVID-19 pandemic shocked the UK economy, 2024). This implies that the overall world economy was affected and consequently the individual economies were also impacted to a great extent.

Further, regarding the UK economy as well, there were drastic issues and changes taking place. Resultantly the overall efficiency of the whole economy was impacted. According to the statistics, it was seen that the pandemic marked a historic shock for the UK economy. It was due to the reason that in response to reducing the effects of the pandemic, the government imposed a national lockdown. Due to this lockdown the GDP of the country reduced by 19.4 %. Since the year 1955, there was not been such a major decline in the GDP that the country has seen due to the pandemic (Chapter 1. The economic impacts of the COVID-19 crisis, 2024).

With the analysis of the above chart, it is clear that in the year 1956, there was a decline in GDP but after that, the revival of the economy started. Thereafter the economy was developing and again there was a little decline in the GDP but the major decline was seen in the year 2019 after the pandemic hit the world (Ma, Rogers and Zhou, 2020). After this pandemic, it was very hard for the countries to overcome the negative effects as all over the world the same effects were created and no country was in a position to help the other country.

Along with the GDP, there was also a huge impact created on inflation within the economy as well. Inflation is defined as the rise in the prices of goods and services over some time. This inflation increases the cost of living of the person as well and in case they do not have a proportionate income then there are chances of an increase in poverty as well. It is due to the reason that when the lockdown was imposed the businesses were shut and there was not any production taking place. As a result of this, the demand increased but the supply was limited and consequently, the prices of the products increased and inflation rose. This was another major issue which was seen due to the pandemic (Shang, Li and Zhang, 2021). The level of demand and supply was not matching and as a result of this, the overall prices increased. This was another major issue relating to the micro-economic aspect and it will be solved by applying the theory of equilibrium. This is majorly because of the reason that when the companies try to meet the equilibrium then automatically the prices will come down. Hence, as a result of this, the overall efficiency of the company and the working capability will be increased.

From the above chart, it is clear that after the pandemic, inflation tended to rise as businesses started to open but there are many issues. For instance, many employees have left their jobs and gone to their native places resulting in less of a workforce. Also, the resources were not easily available and as a result, the overall price increase took place (Nicola et al, 2020). Hence, due to the increase in prices of the product, the purchasing power of the people was reduced as they were not having enough money to buy the necessary goods. Also, this increase in inflation increased in number of people below the poverty line.

In addition to inflation, another macroeconomic impact of the pandemic on the economy was an increase in the unemployment rate. Unemployment is defined as a situation which outlines that the individual does not have employment and is seeking employment but is not able to find work. The pandemic increased unemployment as due to the lockdown businesses were not allowed to operate. Also, after the lockdown was removed many small businesses were shut and this resulted in many of the people becoming unemployed. This also created a huge impact on the overall economy and this is not a good indicator of the health of the economy (Lenzen et al, 2020). For managing inflation in the economy, the government can use the contractionary monetary policy. It is a type of policy which reduces the supply of money in the economy. This will be done by reducing the prices of the bonds and by giving a rise in the interest rate. This economic theory of contraction in monetary policy will assist in the effective development of the economy post-pandemic.

Micro-economic impact of a pandemic on the country

Along with the macro-economic effects, a lot of micro-economic impacts were also created on the working of the individual businesses and companies. The micro-economic is stated as a branch of economics which relates to the decision-making of firms and individual companies for allocating resources so that effective working can be improved (Al‐Thaqeb, Algharabali and Alabdulghafour, 2022). This branch of economics helps in understanding the behaviour of householders, companies, and individuals while making decisions relating to the operations of the company and individual firms. All these created an impact on the individual working greatly. The pandemic has created a lot many effects on the individual working of the companies and as a result, the overall economy was also impacted.

Within the micro-economic factor, the most common effect was made on the supply chain for the companies. Most of the company seek their material from outside the business and the pandemic has stopped the supply chain. The national lockdown was imposed and as a result of this, the availability of the material was hampered. It is due to the reason that when the lockdown was implemented there was a temporary stoppage of the flow of material and goods and as a result, the whole production was disrupted. This was the major microeconomic effect which was developed on the working of the whole economy and the country. From the statistics, it was clear that approximately one-third which is almost 30 % of the manufacturing companies faced supply chain disruption as the material was not available and as a result, the overall efficiency was affected (Early insights into the impacts of the coronavirus (COVID-19) pandemic and EU exit on business supply chains in the UK: February 2021 to February 2022, 2024).

Along with the supply chain disruption, there was also another major microeconomic factor which was affecting the whole of the economy. This was the demand and supply and this affected the working of the whole economy in the UK and all over the world as well. After the lockdown was removed, the demand for the goods was higher but there was not much of the supply and this affected the working of the companies to a great extent (Elgin, Basbug and Yalaman, 2020). Post lockdown the resources were not easily available, employees were also not present and even the supply chain was disrupted. Thus, as a result of this, it was very tough to start production and get back to normal working. But then also the companies tried to arrange the finance and also the government supported in many different ways. Hence, after this the companies were able to revive back within their operations and as a result of this the overall production started and the supply chain was managed.

By complying with the SCE that is Supply Chain Economy, the companies were able to manage and overcome the effects of the supply chain disruption. This SCE is a network involving interrelated activities like distribution, production, procurement, consumption and many other different activities relating to the production process. By complying with this theory of economics the companies were in a position to manage and maintain a good product system (Celik, Ozden and Dane, 2020). Thus, when the products are made available timely then the consumers will be in a position to satisfy their needs. Resultantly the overall development in the profits will take place for the companies. The pandemic also resulted in declining the profits of the company. Hence, after the implementation of SCE, it was seen that there are high chances of increasing the profits of the company and as a result, the competitive position will also increase.

Behavioural challenges due to the pandemic

With further analysis, it is also evident that there were many different types of behavioural challenges as well which were faced by the company due to the pandemic. It is due to the reason that the pandemic has caused major changes in the working patterns and mindset of the employees as well. It is due to the reason that after the lockdown many people feared that when they will work then there are chances that they might get infected with the virus. Hence, as a result of this, unemployment increased (Bhuiyan et al, 2021). Thus, to reduce this, the companies select the method of providing better financial motivators which makes the people motivated to work. When the monetary benefits are more than automatically the overall efficiency is improved and ultimately the overall work will also be increased. Hence it is mandatory for the company they provide better financial motives so that the person works with more efficiency. Thus, it will improve the overall economic development of the companies and they will be in a better position to work. Also when the employees work better then it will result in a better position and all the objectives of the company will be attained well.

Conclusion

At last, it is concluded that the effective development of the economy is necessary to be present as it will help the company in managing and mitigating the overall working. The above essay inferred that the pandemic created different types of micro and macro impacts on the economy. The micro-economic impact includes issues relating to demand and supply, supply chain disruptions and many others. Also, the macro impacts included an increase in inflation, a reduction in GDP, unemployment and many others. At last different economic theories were used for overcoming all these effects. This included complying with the theory of equilibrium, contractionary monetary policy and many other different types of the policies which are assistive in improving the economic condition of the country.

References

Books and Journals

• Al‐Thaqeb, S.A., Algharabali, B.G. and Alabdulghafour, K.T., 2022. The pandemic and economic policy uncertainty. International Journal of Finance & Economics, 27(3), pp.2784-2794.
• Bhuiyan, M.A., Crovella, T., Paiano, A. and Alves, H., 2021. A review of research on tourism industry, economic crisis and mitigation process of the loss: Analysis on pre, during and post pandemic situation. Sustainability, 13(18), p.10314.
• Celik, B., Ozden, K. and Dane, S., 2020. The effects of COVID-19 pandemic outbreak on the household economy. Journal of Research in Medical and Dental Science, 8(4), pp.51-56.
• Elgin, C., Basbug, G. and Yalaman, A., 2020. Economic policy responses to a pandemic: Developing the COVID-19 economic stimulus index. Covid Economics, 1(3), pp.40-53.
• Lenzen, M., Li, M., Malik, A., Pomponi, F., Sun, Y.Y., Wiedmann, T., Faturay, F., Fry, J., Gallego, B., Geschke, A. and Gómez-Paredes, J., 2020. Global socio-economic losses and environmental gains from the Coronavirus pandemic. PloS one, 15(7), p.e0235654.
• Ma, C., Rogers, J.H. and Zhou, S., 2020. Global economic and financial effects of 21st century pandemics and epidemics. Covid Economics, 5, pp.56-78.
• Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Iosifidis, C., Agha, M. and Agha, R., 2020. The socio-economic implications of the coronavirus pandemic (COVID-19): A review. International journal of surgery, 78, pp.185-193.
• Shang, Y., Li, H. and Zhang, R., 2021. Effects of pandemic outbreak on economies: evidence from business history context. Frontiers in public health, 9, p.632043.

Online

• Chapter 1. The economic impacts of the COVID-19 crisis. 2024. Online. Available through: <https://www.worldbank.org/en/publication/wdr2022/brief/chapter-1-introduction-the-economic-impacts-of-the-covid-19-crisis#:~:text=The%20COVID%2D19%20pandemic%20sent,inequality%20within%20and%20across%20countries.>
• Early insights into the impacts of the coronavirus (COVID-19) pandemic and EU exit on business supply chains in the UK: February 2021 to February 2022. 2024. Online. Available through: <https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/earlyinsightsintotheimpactsofthecoronaviruspandemicandeuexitonbusinesssupplychainsintheuk/february2021tofebruary2022>
• GDP and events in history: how the COVID-19 pandemic shocked the UK economy. 2024. Online. Available through: <https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/gdpandeventsinhistoryhowthecovid19pandemicshockedtheukeconomy/2022-05-24#:~:text=The%20COVID%2D19%20pandemic%20prompted,country%20reopened%20over%20the%20summer.>

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