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Microeconomic Analysis (Part 1).
Industry Description and Market Structure Analysis.
Macroeconomic Analysis (Part 2) GDP and Unemployment
(a) The COVID time was the major turn on the events, leading to the cascading impacts.
The purpose was to identify, how the consumers have shifted to online shopping conveniently and have are demanding more of the online resources (Schauer, 2019). It has caused the physical stores to shut down and due to the low visually appealing merchandise stores, the consumers are now researching more on the online sites and vast online competitors are competing in the same market.
.• Price and Economy of the Producers – As there is the low demand of the fashion brands, footwear, and the furniture and people buying it online, the costs of high rentals have to lead to experiencing a lower profit (as rentals are high to be paid every month and the cost of engaging employees who would sell the products), which has to lead to the consequence of shutting down stores, employees losing jobs and this has further lead to low demand of the nonessential items even more (Zamani, 2016).
c) Numerous producers and suppliers – The market of the fashion brands, footwear, and even furniture are high which are competing in the niche space (Varshavskaya, 2019).
Consumers are one Australian people-: who have shifted their preference from the physical purchasing to online shopping. The second shift is buying the essential items more than the nonessential items. Low demand for nonessential and premium items leading to low employment and a high-pressure environment.
d) Landlords and the retailers are experiencing high rentals pressure and the low demand from the consumers
Consumers have also shifted from the non-essential and luxury products to the essential items.
In this case, it is the producer feeling inelastic supply, they can supply, but there are demand shock low purchasers. Nevertheless, any changes to consumers' preferences, for example, sudden news that the fashion brands are selling in the sanitized environment, offering heavy discounts or providing a free medical check-up, can lead to sudden splurge in such a market. However, for short term it is elastic demand and the producer supplier is inelastic.
(a) The market is large, where the goods sold are the nonessential items and the premium products. before Cornona they were demanded in the good volume, the Consumer Goods Index indicated good sales growth, but after the Corona effect, there has been a negative and the sudden decline, leading to the shift of power to the Monospony power (where there are one buyer and many sellers). The market was a perfect competition market before the Corona, which changed to Monopsony, shifting power in the hands of consumers who can demand, regulate and spend following their needs (Jadidzadeh, 2017)
b) A monopsony would mean one buyer and there would be many sellers, like in this case where the Australian consumers are one and there are many sellers. It is indicated as the monopsony employer that holds the market power that can hire workers only when the consumers are demanding more and there is a shift of power. It has lead to the low merchandising stores that are willing to invest in the physical stores, low employees hiring and more unemployment, and low wages are given. Leading to low demand for goods such as fashion, footwear, furniture as they are nonessential and luxury products. And there is the shift to the funding to essential activities and the nonessential items (fashion brands, footwear, furniture, etc.) are demanded less. Giving up the physical stores, closing it, and fully operating it online is a long term process as the infrastructure and opening stores require high sums.
(c) Shopping Centre Council of Australia is regulated under the Retail Code of Conduct. They are trying to lower the rentals, or even boost the demands of the rental through introducing the subversion scheme, where the rentals can be paid upfront after a certain tenure or period. The Australian government is also trying to lower the rentals, support the producers with the various policies, such as not paying rentals for the 3 months or subsequently asking the landlords to rechange the terms contracts to safeguard the interests of retailers first and then of the landlords. If the retailers are supported, they would continue to hire the workers and the due to the workers getting wages they can spend as they want. This would lead to a higher multiplier impact (Jadidzadeh, 2017).
(d) Retailers groups and the landlords are the leading impacted groups here. They are impacted with the high volume of the consumers who are demanding less and it has lead to the consequences, such as low purchases and facing the high rentals (which is the cost to the producers) and the producers can hire less of the workers and even has lead to high employment causing the detrimental impact on the economy. The landlords are unable to bear the high costs (as rents are enormously high) causing the shops to shut down and to higher the lease options.
(a) External parties affected – Government and the Shopping Mall Association along with the various groups.
(b) The impact is negative as the retailer's groups and the landlords have impacting, which are trying to vacant their high rented places and even defaulting on the payment. it has caused in the high rentals places to either shut down or experience the negative impacts on the shopping malls association, that have experienced the cascading impacts of the economy. It is not positive at any aspect
(c) Governments are trying to introduce the policies to safeguard the interest of the producers (mainly the retailers and the landlords) to waive off the enormous rentals, or to include in the subsidized rates and even offer the subversion schemes (Palley, 2019). The other third parties are the Shopping mall association, which has intervened to safeguard the interest of the retailers, to not pay the enormous rent or the substantial rental capital. if there would low rental spaces demand or the leases are given up, then it would cause landlords to be impacted.
(b) It would decrease the employment and low hiring people
The fiscal policy such as lowering taxes and government spending has increased to support the economy. Due to higher spending, the producer's interest is safeguarded, as the consumers get more income to spend which they can spend on the essential and the nonessential items. Lowering taxes can again lead to higher spending and low savings.
The policy chosen is expansionary fiscal policy
(a) To save the interests of the producers and the consumer.
(b) The monetary policy is the expansionary policies adapted to expand in the economy. It has included more discount rates lowering and reserve requirements lowering, which can help to promote more banks to give loans and more encourage the consumer to pay high (Palley, 2019).
It is concluded, that due to the COVID 19, there have been detrimental impacts, causing a shift of the consumers for the online preferences from the visiting stores. It has led to low demand for the physical stores shopping, high rentals causing producers to shut down shops, or high leasing impacts. Subsequently, low workers are hired and have led to lower wages given to consumers and thus causing more impact on the economy. To revive, it is recommended to adopt expansionary monetary and fiscal policies, to revive the interest of consumers.
Jadidzadeh, A., & Serletis, A. (2017). How does the US natural gas market react to demand and supply shocks in the crude oil market?. Energy Economics, 63, 66-74.
Mendes Jr, P., Leal, J. E., & Thomé, A. M. T. (2016). A maturity model for demand-driven supply chains in the consumer product goods industry. International Journal of Production Economics, 179, 153-165.
Palley, T. (2019). The economics of the super‐multiplier: A comprehensive treatment with labor markets. Metroeconomica, 70(2), 325-340.
Riganti, A., Siciliani, L., & Fiorio, C. V. (2017). The effect of waiting times on demand and supply for elective surgery: Evidence from Italy. Health Economics, 26, 92-105.
Schauer, P., Shennan, S., Bevan, A., Cook, G., Edinborough, K., Fyfe, R., ... & Pearson, M. P. (2019). Supply and demand in prehistory? Economics of Neolithic mining in northwest Europe. Journal of Anthropological Archaeology, 54, 149-160.
Shopping centers feel the pinch as retail speeds up move to online. Retrieved from the article dated 11th September, 2020 from https://www.abc.net.au/news/2020-09-11/shopping-centres-feel-the-pinch-as-retail-moves-online/12651046
Varshavskaya, E., & Kotyrlo, E. (2019). Graduates in engineering and economics: Between demand and supply. Educational Studies, (2), 98-128.
Zamani, N. (2016). How the crude oil market affects the natural gas market? Demand and supply shocks. International Journal of Energy Economics and Policy, 6(2).
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