THUONG MAI UNIVERSITY
FACULTY OF HUMAN RESOURCE MANAGEMENT
GROUP DISCUSSION ECONOMICS
Topic: Describe the factors that impact the market equilibrium price and
quantity? Use graphs to demonstrate your answers? Use the demand-supply
diagrams to show the effect of the COVID-19 pandemic on the tourism market in
Viet Nam.
Group discussion: group 1
Class: MIEC1031
Lecturer: Phan The Cong
Hà Nội-2023
LIST OF MEMBERS
No. Member
1 Hoàng Khánh An
2 Bùi Duy Anh
3 Nguyễn Hoàng Anh
4 Nguyễn Mai Anh
5 Nguyễn Thị Phương Anh
6 Phạm Hải Anh
7 Trần Ngọc Nhất Anh
8 Vũ Thị Quỳnh Anh
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MEETING MINUTES – GROUP 1
Monday, October 23th, 2023
Time: from 9.30 pm to 10.30 pm
Place: Google Meet
Participants: 8/8
Contents for discussion:
- Discuss the topic, raise the members' ideas to exploit the topic's content.
- Assign tasks to members.
Duties for participants: Create content for each thesis
Leader Minute-Taker
( Signature and name) ( Signature and name)
Quynh Anh Hai Anh
Vu Thi Quynh Anh Pham Hai Anh
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MEETING MINUTES – GROUP 1
Wednesday, November 1st, 2023
Time: from 9.00 pm to 9.30 pm
Place: Google Meet
Participants: 8/8
Contents for discussion:
- Summarize the information and select the necessary information for the discussion.
- Assign parts of the presentation to members.
Conclusion:
- Select the essential information for the topic.
- Assign parts of the presentation: design Word, PowerPoint, and present the
topic.
Duties for participants:
● Prepare Word file: Hai Anh
● Design PPT: Phuong Anh
Leader Minute-Taker
( Signature and name) ( Signature and name)
Quynh Anh Hai Anh
Vu Thi Quynh Anh Pham Hai Anh
3
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MEETING MINUTES – GROUP 1
Monday, November 6th, 2023
Time: from 9.00 pm to 10.00 pm
Place: Google Meet
Participants: 8/8
Contents for discussion:
- Evaluate work progress, give opinions.
- Continue to complete the presentation.
Conclusion:
- Team members do their parts well and on schedule.
Leader Minute-Taker
( Signature and name) ( Signature and name)
Quynh Anh Hai Anh
Vu Thi Quynh Anh Pham Hai Anh
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CONTENT
1. Supply Determinants.........................................................................................................................
1.1. Equilibrium Price........................................................................................................................
1.2. Supply Factors.............................................................................................................................
1.3. Demand Factors...........................................................................................................................
2. Current conditions of equilibrium price and quantity..................................................................
2.1. Impacts of Covid-19 on tourism market.....................................................................................
2.2. Demand and supply curves of tourism market before and in Covid-19......................................
3. Recommendation and solutions.......................................................................................................
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1. Supply Determinants
Factors affecting market equilibrium quantity and price
1.1. Equilibrium Price
Also called a market-clearing price, the equilibrium price is the price at which
demand matches supply, producing a market equilibrium acceptable to buyers and
sellers.
At the point where an upward-sloping supply curve and a downward-sloping
demand curve intersect, supply and demand in terms of the quantity of the goods are
balanced, leaving no surplus supply or unmet demand. The level of the market-
clearing price depends on the shape and position of the respective supply and demand
curves, which are influenced by numerous factors.
The market equilibrium price and quantity are determined by the interaction of
supply and demand in a competitive market. Several factors can influence these
equilibrium values, and they include:
1.2. Supply Factors
- Production Costs:
Changes in the cost of inputs, such as labor, materials, and energy, can impact
the supply curve. An increase in production costs can lead to a decrease in supply,
while reduced costs can increase supply.When production costs rise, the supply curve
shifts to the left, resulting in a decrease in the quantity supplied at each price level. If
demand remains constant, this will lead to a higher equilibrium price and a lower
equilibrium quantity. Producers may need to charge a higher price to cover their
increased costs, and consumers may purchase less of the product due to the higher
price. Conversely, when production costs decrease, the supply curve shifts to the right,
leading to an increase in the quantity supplied at each price level. If demand remains
constant, this will result in a lower equilibrium price and a higher equilibrium
quantity. Producers can offer the product at a lower price due to reduced costs, and
consumers are more likely to buy more at the lower price.
- Technological Advancements:
Innovations that improve production processes can increase supply by reducing
costs and increasing efficiency. Technological advancements can also lead to entirely
new products or variations of existing products. This can create new markets or
expand existing ones. In these cases, technological advancements not only impact the
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equilibrium price and quantity but also influence market dynamics by creating entirely
new equilibriums.
- Government Regulations:
Regulations and policies, such as taxes, subsidies, and environmental
regulations, can directly affect the cost of production and, consequently, the supply of
goods and services. Some regulations might limit the production or sale of certain
goods or services. For instance, regulations can cap the quantity of goods that can be
produced or set limits on the number of licenses available for certain businesses . Such
supply constraints can shift the supply curve to the left, leading to higher equilibrium
prices and potentially reduced quantities supplied. Some government regulations
directly impose price controls, such as price ceilings or price floors .Price ceilings set
a maximum price, while price floors set a minimum price. These controls can either
lead to surpluses (excess supply) or shortages (excess demand), impacting the
equilibrium quantity. For example, rent control laws can lead to shortages in housing
markets.
1.3. Demand Factors
- Consumer Preferences:
Changes in consumer preferences and tastes can affect the demand for a
product. For example, if a new trend or innovation makes a product more desirable,
demand may increase. Consumer preferences can change over time, influenced by
various factors like trends, cultural shifts, or changes in consumer attitudes. These
shifts in preferences can lead to changes in demand for specific products. When
consumer demand increases due to changing preferences, it can result in a higher
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equilibrium price and quantity as producers respond by supplying more to meet the
rising demand.
- Income Levels:
As consumers' incomes change, their purchasing power also changes. An
increase in income can lead to an increase in demand for certain goods, while a
decrease in income may lead to reduced demand. As income levels increase, the
demand for normal goods tends to rise. Normal goods are products where demand
increases with higher income as people are willing to spend more on these goods.
Consequently, an increase in income leads to a shift in demand for normal goods,
causing the equilibrium price and quantity to increase. On the other hand, inferior
goods are those for which demand decreases as income increases. In this case, an
increase in income may cause a shift in demand away from these goods, leading to a
decrease in equilibrium price and quantity.
- Population:
The size of the population in a market area directly affects the demand for
goods and services. A larger population generally leads to a larger consumer base. As
the population grows, the demand for various products and services is likely to
increase, which can impact the supply side.
An increase in population, leading to higher demand, can result in an increase
in equilibrium price. This is because, with a larger customer base, businesses may be
able to charge higher prices for their products or services, assuming supply remains
constant. With a growing population, the equilibrium quantity may also increase
because more units of a product or service are demanded at the prevailing market
price.It also have an impact on production costs, a larger labor force can lead to lower
production costs
- Consumer Expectations:
While it is clear that the price of a good affects the quantity demanded, it is
also true that expectations about the future price or expectations about tastes and
preferences, income, and so on can affect demand. For example, if people hear that a
hurricane is coming, they may rush to the store to buy flashlight batteries and bottled
water. If people learn that the price of a product like coffee is likely to rise in the
future, they may head for the store to stock up on coffee now. These changes in
demand are shown as shifts in the curve. Therefore, a shift in demand happens when a
change in some economic factor other than price causes a different quantity to be
demanded at every price.
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2. Current conditions of equilibrium price and quantity
2.1. Impacts of Covid-19 on tourism market
The COVID-19 pandemic has had a significant impact on the tourism market
worldwide. Some of the key impacts include:
- Travel restrictions and border closures
Governments across the globe have imposed travel restrictions and closed their
borders to control the spread of the virus and protect public health. The specific
restrictions and closures vary from country to country and are subject to change based
on the evolving situation. Typically, travel restrictions involve limitations on
international travel, including the suspension of flights and the closure of land borders.
Many countries have also imposed mandatory quarantine or self-isolation
requirements for incoming travelers. These measures are often based on the level of
COVID-19 transmission in the traveler's country of origin. This has resulted in a sharp
decline in international tourism, as people are unable or unwilling to travel.
- Decline in tourist arrivals
The pandemic has led to a significant decrease in tourist arrivals, with many
countries experiencing a drop of over 90% in visitor numbers. The fear of contracting
the virus and concerns about travel safety have deterred many people from embarking
on trips. The uncertainty surrounding the pandemic, including the risk of infection and
potential disruptions to travel plans, has led to a decrease in travel demand and a
subsequent decline in tourist arrivals. This has had a severe economic impact on
destinations that heavily rely on tourism for revenue.
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- Closure of tourist attractions and businesses
Many tourist attractions, hotels, restaurants, and other tourism-related
businesses have been forced to close or operate at reduced capacity due to lockdowns
and social distancing measures. To prevent the spread of the virus, many tourist
attractions, including museums, theme parks, historical sites, and cultural landmarks,
were temporarily closed. This was done to ensure the safety of visitors and employees
and to comply with government regulations and health guidelines. This has resulted in
job losses and financial hardships for individuals and businesses in the tourism sector.
- Economic downturn
The decline in tourism has far-reaching economic ramifications, as it
constitutes a vital source of income and employment for numerous countries. The loss
of tourism revenue has translated into reduced GDP growth and heightened
unemployment rates in these destinations, placing significant strains on their
economies.
- Changes in travel behavior
The pandemic has triggered specific shifts in travel behavior. People are opting
for domestic and regional travel rather than international journeys, with an emphasis
on less crowded and more remote destinations to prioritize health and safety. This
trend has led to particular locations benefiting from an influx of domestic tourists.
- Changes in tourism demand
There have been changes in tourism demand. Certain tourism segments, such
as cruise travel, business travel, and mass tourism, have experienced a sharp decrease
in demand due to health concerns and restrictions. In contrast, there is a notable
increase in demand for nature-based tourism, outdoor activities, and sustainable
tourism as travelers seek safer and more responsible experiences.
- Recovery challenges
The tourism industry faces unique challenges in recovering from the
pandemic's effects. Rebuilding traveler confidence is paramount, necessitating the
adaptation of destinations and businesses to new health and safety protocols.
Additionally, there is a call for investment in tourism infrastructure to meet the
changing demands and expectations of travelers, emphasizing hygiene and safety
measures in accommodations and attractions.
In sum, the COVID-19 pandemic has not just caused a broad economic
downturn but has brought about specific and significant disruptions to the global
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tourism market. The industry's future trajectory is closely tied to its ability to adapt to
these changes and rebuild trust among travelers.
2.2. Demand and supply curves of tourism market before and in Covid-19
The graph compares the difference in the market between two periods before
the Covid-19 disaster and during the pandemics.
Generally, it could be seen that the equilibrium witnessed a drop in the
pandemic, due to the decreases of price and quantity of goods.
Firstly, it is obvious that the quantity of goods after the explosion of the
pandemic suddenly dropped and in the graph, it is easy to see that the Q1 (quantity of
goods during the pandemic) is too far from the Q0 (quantity of goods before the
disaster). During the pandemic, Vietnam faced the dangerous virus and the isolation
was the best option to protect citizens. Thus, people cannot interact in the community.
The downward trend of quantity of goods in tourism was easy to understand in this
situation. People did not create values, the lines of travelers were stopped, and every
activity was forbidden.
Not only did the quantity of goods drop, but also the price witnessed a fall
during the Covid-19. Not like the market of food. When the Covid-19 happened, the
price of food jumped to another number that would be double or triple the balance
price before the pandemic. The reason was the scarce needs, when people collected all
the needs to survive. But tourism was totally different. It is not a need, it is a service
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and people can live without service. Tourism in another way, I can say that it was
impossible to create values in that period. The isolation was the killer of tourism, no
money exchanged, no payment, and unfortunately, no tourism. The price reached the
floor immediately and continued to drop. Even though they set the tour for free, it was
just for nothing, the tourist couldn't pay for that tour and they were forbidden to hang
out.
In conclusion, it is obvious that when both the Q and P decrease, the
equilibrium also decreases and this is the matter of tourism during the Covid-19
pandemic. The Covid-19 had a huge impact on tourism and made it worse.
3. Recommendation and solutions
The COVID-19 pandemic has had a profound impact on the demand and
supply of the tourism market in Vietnam, as it has in many countries around the
world. To address the challenges brought about by the pandemic and to stimulate the
recovery of the tourism industry, several solutions and strategies have been
considered:
- Health and Safety Measures: Implement and enforce strict health and safety
protocols to reassure travelers that their health is a top priority. This includes
enhanced cleaning, social distancing, and mask mandates.
- Vaccination Campaigns: Accelerate the vaccination of the population,
especially those working in the tourism sector. This can help create a safer
environment for both tourists and employees.
- International Travel Agreements: Establish travel agreements and travel
corridors with countries that have effectively controlled the virus. These
agreements can help boost international tourism by allowing for easier travel
between countries.
- Incentives and Discounts: Offer incentives and discounts for domestic
travelers, such as reduced hotel rates, transportation deals, or entrance fee
discounts for attractions. This can stimulate domestic demand.
- Diversification of Tourism Products: Diversify tourism products and
experiences to cater to changing consumer preferences. For example,
focusing on outdoor and nature-based activities that align with safety
concerns.
- Support for Tourism Businesses: Provide financial support to tourism-
related businesses to help them survive during the crisis. This could include
grants, low-interest loans, or tax breaks.
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- Sustainable Tourism Practices: Promote sustainable tourism practices to
attract travelers who are increasingly conscious of their environmental
footprint.
- Training and Development: Provide training and development programs for
those in the tourism sector to improve their skills and adapt to new health and
safety standards.
- Regulatory Flexibility: Adjust regulations and policies to be more flexible
and responsive to the changing needs of the tourism industry during the
pandemic.
- Crisis Preparedness: Develop a comprehensive crisis management plan for
the tourism industry to respond effectively to future challenges.
- Collaboration with International Organizations: Collaborate with
international organizations and tourism bodies to ensure a coordinated
response and share best practices for recovery.
It's important to note that the recovery of the tourism industry in Vietnam, as in
many other countries, will depend on both domestic and international factors,
including the control of the pandemic, vaccination rates, global economic conditions,
and traveler confidence. Solutions should be adaptive and responsive to changing
circumstances.
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