Executive Summary

The report is based on the Demand and Supply analysis of Surgical Face Mask
during COVID-19 situation. The coronavirus disease 2019 (COVID-19) pandemic
is currently perceived as one of the greatest global threats, not only to public health
and well-being, but also to global economic and social stability. According to the
World Health Organization (WHO), wearing face masks is recommended as part
of personal protective equipment and as a public health measure to prevent the
spread of coronavirus disease 2019 (COVID-19) pandemic. The report shows the
changes in demand and supply of face mask during this pandemic. Also shows
how the government intervenes to keep a balance between demand and supply of
face mask to bring stability in the market.

Introduction

A variety of public health and hygiene measures have been initiated; the most
visually noticeable perhaps is the wearing of face masks. Their use, however, is
deeply connected to social and cultural practices and has acquired a variety of
personal and social meanings. The medical research on the use of face masks as
personal protective equipment (PPE) against SARS-CoV-2 transmission was
interpreted very cautiously.

Masks are extremely scarce after the outbreak, prices are soaring since mask
merchants want to profit more. Institutions illegally intercept masks. Masks have
also become the hottest topic of the day. People who can’t afford masks raise a
series of social problems. The question of whether the increase in the price of
masks is reasonable and how masks are distributed has gradually become the focus
of society. And the market mechanism cannot adjust its internal contradictions on
its own, it requires the government’s tangible hand to intervene. To intervene in
this problem, it is necessary to understand the factors related to the change in the
price of the mask.

How do face masks help prevent the spread of COVID-19?

COVID-19 is transmitted from person to person through respiratory droplets

produced when an infected person coughs, sneezes, or talks. These droplets can
land in the mouths or noses of people who are nearby or possibly be inhaled into
the lungs. Masks provide a simple barrier to help prevent these respiratory droplets
from spreading in the air. You should wear a mask to protect others in case you
have the virus, and you should wear a mask to protect yourself.
Surgical Masks

Surgical masks are disposable, loose-fitting face masks that cover your nose,
mouth, and chin. They’re typically used to:
 Protect the wearer from sprays, splashes, and large-particle droplets.
 Prevent the transmission of potentially infectious respiratory secretions from
the wearer to others.
Surgical masks can vary in design, but the mask itself is often flat and rectangular
in shape with pleats or folds. The top of the mask contains a metal strip that can be
formed to your nose.
Making Surgical Masks

Surgical face masks need to provide 85%-99% protection to prevent the spread of
disease. They are made up of a multi-layered structure by covering one layer of
textile with non-woven bonded fabric on both sides. Three or four layers are the
norm. A fine inner mesh of plastic fibers acts as a filter. It is made from melt-
blown fabric, which is what makes a mask breathable.

Melt-blown fabric is created through a process that melts down plastic and blows it
out in strands. The same process is used to create spunbond fabric, which is also
used in face masks worn by healthcare workers. The material most commonly used
to make surgical masks is polypropylene, either 20 or 25 grams per square meter
(gsm) in density. Masks can also be made of polystyrene, polycarbonate,
polyethylene or polyester. Manufacture includes several components such as the
ear loops, the metal strip that allows you to bend the mask around the nose bridge,
and the sterile packaging. Surgical masks need to be hypoallergenic, non-skin
irritant and compliant with global standards.

Demand and Supply Function

The change in the price of the mask itself will cause consumers and suppliers to
make changes in the amount of their demand and supply, which is premised on the
rational assumption, and the non-price factor, i.e. factors other than price, will
cause changes in demand and supply, which will cause the position of the demand
curve and supply curve to move. The main factors affecting the demand for masks
are: mask price Px, consumer income Ci, consumer preference for mask h, related
commodity prices (such as molten spray cloth, etc.) Pi, consumer expectations of
mask price Pe. Also the main factors affecting the supply for masks are: mask price
Px, input price Pi, technology T, number of sellers N, etc. Influences can be
represented by functions such as:

Demand function: Qd = f (Px,Ci,h,Pi,Pe)

Supply function: Qs = f (Px,Pi,T,N)

Demand and Supply Analysis of Surgical Face Mask

The green curve represents the ‘normal’ demand curve for face masks in pre-
COVID-19 times. The supply curve is the orange curve. For simplicity’s sake
we will just keep one demand and one supply curve, where we are at an
initial equilibrium price P1 for the quantity supplied Q1.

P1

1 Q

Q1
Figure-1: Demand and Supply Equilibrium

As shown in Figure-1, in the right-angle coordinate system, the horizontal axis

represents the supplier’s supply of masks, the vertical axis indicates the price at
which the consumer is willing and able to purchase the mask, and for the
consumer, the demand and price of the mask are negatively related. Under normal
circumstances, the demand curve of the mask is D, the supply curve is S, their
intersection is point E, the ordinate of point E indicates the price P 1 of the mask
when supply and demand are balanced, and its horizontal coordinates represent the
quantity Q1 when supply and demand are balanced.

An Increase in Demand for Face Mask

We have seen a recent increase in the demand for face masks from D 1 to D2, which
leads to a rise in price from P1 to P2. The quantity being demanded and supplied
should also increase from Q1 to Q2, but in reality, there is a shortage in quantity,
preventing producers from supplying at the equilibrium price.

S1

P2 E2

P1 E1

D2

D1

0 Q1 Q2 Q
Figure: 2 An Increase in Demand for Face Mask

At the beginning of the outbreak, only a few people realized the severity of the
new coronavirus, a small number of people began to stock up, consumer
preference for masks increased, demand increased from Q1 to Q2, so the demand
curve D1 to the right level moved to D2, in the case of the supply curve unchanged,
the demand curve to the right will move point E1 to point E2, the price of masks
increased.

Price Control on Face Mask

Based on Figure 1 and Figure 2, the price of face masks is predicted to continue
increasing, while the quantity supplied may not be sufficient to support the
demand. To protect consumers’ rights, as well as stabilize the market, it seems
necessary for the government to intervene by setting a price ceiling, or a maximum
price, below the equilibrium price, preventing producers from further rising prices.

P1 E

Pmax Maximum Price

Excess Demand D

0 Q0 Q1 Q2 Q
Figure:3 Price Control on Face Mask

The figure above represents what would happen if the government implemented a
maximum price for some time in the market. Without government interference, the
quantity demanded and supplied will be Q1 at the equilibrium price of P1. At the
imposed price, Pmax, the quantity demanded will land at Q 2. Therefore, there will be
surplus of demand, which may lead to several problems.

First, the shortages of face masks may cause black (or underground) markets to
arise and provide for consumers at higher prices. This may eventually lead to
shadow economies, and governments would not be able to collect taxes and would
experience a decrease in revenue. Second, consumers may be made to queue up for
the goods, leading to an uneven and unfair distribution of goods.

Government Action to Prevent Excess Demand

To prevent such problems from arising, the government may have to take further
measures (apart from price ceiling imposition), mainly by increasing the supply of
face masks through direct provisioning or subsidies.
Direct provisioning is not possible since the government is not a producer.
Subsidies then could be the choice, in which the level of subsidy depends on the
state budget, but typically being a fraction of the difference between the reasonable
market price and the ceiling price. The government may also request banks to offer
some concessional loans for firms which produce large amounts of face masks.
P

P1 E1 S1

E2

Pmax Maximum Price

Excess Demand D

0 Q0 Q1 Q2 Q
Figure:4 Government Action to Prevent Excess Demand

By doing so, the government would shift the demand curve to the right, so the
equilibrium price will drop from P1 to Pmax, with Q2 face masks being supplied and
demanded. This increase of supply would support the higher demand of
consumers, even with the price control, as the quantity supplied would increase
from Q1 to Q2. In this case, the government would have to incur an opportunity
cost, that is, to reduce expenditure in other areas.
In addition, several other considerations have to be made. First, the price ceiling
will have to be carefully calculated according to the state budget and based on the
market price. Second, the government should publicly announce the price ceilings
for face masks and provide clear guidelines for suppliers to follow. This would
also allow law enforcement to take effective measures to prevent any suppliers
from exceeding the price ceiling and stabilize the market. Third, the price ceiling
policy should be abolished once the coronavirus has been brought under control.
Key Findings

 COVID-19 has caused a dramatic shortage in the supply of face masks,

which is mainly explained by a surge in demand.
 Since no country can meet the increase in the demand for masks alone, trade
is essential. Export bans are harmful for countries without production
 capacity, but can also backfire on the country imposing them when they
need to import inputs, additional masks or other essential goods. Tariffs or
export licenses can delay trade, in addition to increasing prices.
 The smooth operation of transportation infrastructure and logistics,
especially air cargo, is critical to support the face masks value chain during
the crisis. More attention should also be given to the supply of key inputs.
 But free trade and trade facilitation are not enough to solve the current
shortage; an important increase in supply is required in the short-term,
requiring government planning and incentives for firms to convert existing
assembly lines and create additional capacity. Certification procedures
should be expedited to allow masks produced by new companies to be
traded as soon as possible
 Looking ahead, it would be excessively costly for every country to develop
production capacity that matches crisis demand and encompasses the whole
value chain. An alternative, more effective and cost-efficient solution in the
long-term may involve the combination of strategic stocks; upstream
agreements with companies for rapid conversion of assembly lines during
crises (with possible government incentives and co-ordination); and
supportive international trade measures.

Conclusion

Since the threat of COVID-19 is still existing. So the people must maintain social
distancing, wear masks, take vaccines that could help to avoid the chance being
affected. According to the World Health Organization (WHO), wearing face masks
is recommended as part of personal protective equipment and as a public health
measure to prevent the spread of coronavirus disease 2019 (COVID-19) pandemic.
To safeguard people amidst the contagious COVID-19, the government should
look into this matter and make informed decisions based on the present situation.
The price of face masks will continue to rocket to higher, more absurd levels
without proper government intervention, and this situation may result in further
hysteria and eventually market failure. The government should play a crucial role
in stabilizing the market and offering the best options for its people.