,ECS2606 Assignment 1 (COMPLETE ANSWERS) Semester 1 2025
(253465 ) - DUE 24 March 2025; 100% Correct solutions and
explanations.
Answer ALL the Questions
Explain and diagrammatically illustrate the impact that the Covid-19 -
pandemic induced restrictions on economic activities imposed in
CHINA in 2020/21 had on the equimarginal principle . [10] Explain how
the following methods can be used to determine the willingness to pay
for benefits: [25] i. Averting costs ii. Wage rates iii. Children’s health iv.
House prices v. Intercity wage differentials 3. Discuss and
diagrammatically illustrate the fundamental balance principle. [25]
1. Impact of Covid-19 Pandemic-Induced Restrictions on the
Equimarginal Principle in China (2020/21) [10 marks]
Equimarginal Principle:
The equimarginal principle states that for optimal allocation of
resources, the marginal benefit per unit of resource should be equalized
across all uses. In other words, resources should be allocated to different
activities in such a way that the last unit spent on each activity provides
the same marginal benefit.
Impact of Covid-19 Restrictions on the Equimarginal Principle:
In 2020/21, China implemented strict pandemic-induced restrictions,
including lockdowns, travel bans, and restrictions on various sectors
(such as retail, manufacturing, and services) to control the spread of
Covid-19. These restrictions had significant effects on resource
allocation, violating the equimarginal principle.
1. Shift in Resource Allocation:
Due to the pandemic, resources were disproportionately shifted
toward essential services, such as healthcare, pharmaceuticals, and
, food production, while other sectors like tourism, hospitality, and
non-essential retail saw a dramatic decline in resource allocation.
This caused inefficiency in the overall allocation, as resources
were no longer distributed in a way that equalized marginal
benefits across all sectors.
2. Changes in Consumer Preferences:
The pandemic altered consumer behavior and demand patterns.
People were more likely to spend on health-related goods (like
sanitizers, masks, etc.), medical treatments, and home
entertainment, while spending on non-essential products decreased.
This caused distortion in the marginal utility of resources, as
demand shifted toward sectors deemed more critical, disrupting the
ideal distribution of resources.
3. Government Interventions:
The Chinese government focused on sectors critical for public
health and economic stability, which meant the government
directed resources towards essential industries like healthcare,
transport, and digital infrastructure. However, this intervention
skewed the application of the equimarginal principle, as resources
were not allocated in a balanced way to maximize overall utility.
Diagrammatic Illustration of Impact:
javascript
Copy
Before the Pandemic: After Pandemic Restrictions:
| |
| MB1 MB2 MB3 | MB1 MB3 MB2
| / / / | / / /
| / / / | / / /
| /_______/________/___________ | /_________/________/
| Allocation of Resources | Allocation of Resources
| (Equimarginal) | (Inefficient)
(253465 ) - DUE 24 March 2025; 100% Correct solutions and
explanations.
Answer ALL the Questions
Explain and diagrammatically illustrate the impact that the Covid-19 -
pandemic induced restrictions on economic activities imposed in
CHINA in 2020/21 had on the equimarginal principle . [10] Explain how
the following methods can be used to determine the willingness to pay
for benefits: [25] i. Averting costs ii. Wage rates iii. Children’s health iv.
House prices v. Intercity wage differentials 3. Discuss and
diagrammatically illustrate the fundamental balance principle. [25]
1. Impact of Covid-19 Pandemic-Induced Restrictions on the
Equimarginal Principle in China (2020/21) [10 marks]
Equimarginal Principle:
The equimarginal principle states that for optimal allocation of
resources, the marginal benefit per unit of resource should be equalized
across all uses. In other words, resources should be allocated to different
activities in such a way that the last unit spent on each activity provides
the same marginal benefit.
Impact of Covid-19 Restrictions on the Equimarginal Principle:
In 2020/21, China implemented strict pandemic-induced restrictions,
including lockdowns, travel bans, and restrictions on various sectors
(such as retail, manufacturing, and services) to control the spread of
Covid-19. These restrictions had significant effects on resource
allocation, violating the equimarginal principle.
1. Shift in Resource Allocation:
Due to the pandemic, resources were disproportionately shifted
toward essential services, such as healthcare, pharmaceuticals, and
, food production, while other sectors like tourism, hospitality, and
non-essential retail saw a dramatic decline in resource allocation.
This caused inefficiency in the overall allocation, as resources
were no longer distributed in a way that equalized marginal
benefits across all sectors.
2. Changes in Consumer Preferences:
The pandemic altered consumer behavior and demand patterns.
People were more likely to spend on health-related goods (like
sanitizers, masks, etc.), medical treatments, and home
entertainment, while spending on non-essential products decreased.
This caused distortion in the marginal utility of resources, as
demand shifted toward sectors deemed more critical, disrupting the
ideal distribution of resources.
3. Government Interventions:
The Chinese government focused on sectors critical for public
health and economic stability, which meant the government
directed resources towards essential industries like healthcare,
transport, and digital infrastructure. However, this intervention
skewed the application of the equimarginal principle, as resources
were not allocated in a balanced way to maximize overall utility.
Diagrammatic Illustration of Impact:
javascript
Copy
Before the Pandemic: After Pandemic Restrictions:
| |
| MB1 MB2 MB3 | MB1 MB3 MB2
| / / / | / / /
| / / / | / / /
| /_______/________/___________ | /_________/________/
| Allocation of Resources | Allocation of Resources
| (Equimarginal) | (Inefficient)
