The Main Impact of Flu Epidemic - Essay Example

ECONOMIC EFFECTS OF AVIAN FLU INTRODUCTION An avian flu pandemic is a dangerous proposition for a country and it can have severe economic effects on the country depending on its severity. Since such a flu as seen in past such as avian influenza in 2003 can put the health of millions of people at risk in addition to having serious economic consequences. The first effect is on the poultry which needs to be culled or destroyed thus damaging the poultry production and affecting the livelihood of hundreds of people. Moreover, this bird flu could also have risk of human infection. Thus in general, the bird flu will in all probability reduce the economic growth of the country. And this would lead to a significant reduction in trade and commerce. As we have seen in 2003, the outbreak SARS had a major economic effect even though it had a small impact on health and was treatable. On the global side, SARS infected around 8,000 people and about 800 died. (Cooper and Coxe 2005) while economically, East Asia lost about $18 billion because of the epidemic. (Fan 2003, Asian Development Bank 2003). And as per experts, the avian flu is more damaging and thus it would lead to lot higher amount of losses both human as well as economic.(Bloom et al., 2005) Moreover, there is still uncertainty about the impact of the epidemic and its economic fallout. Although there have been some economic studies in the past on the impact of flu (Meltzer et al. 1999), nothing can be certain regarding the severity of the disease, and its economic impact. POSSIBLE EFFECTS The main impact of Flu epidemic (as in case of SARS) should be on the demand side, as consumption and the demand for services will be significantly reduced. This is because the people try to avoid eating chicken or related poultry and the demand going to drop. However, if the flu infects the humans as well, then it would also impact the supply side, as members of the labor force will get sick or die thus destroying both the human as well as physical capital. The most important effect would be a sharp decline in demand of chicken and meat and people would in all probability avoid eating out. This will also lead to people avoiding shopping malls, restaurants, and other public spaces, and a shrinking of labor supply (in case of human infection) as workers became ill or stayed home out of fear. Thus an avian flu will affect both the demand and supply-side in the economy. Because of the flu, there are going to be direct production losses because of loss of poultry. Moreover, the control and precautionary measures such as culling of birds, will further increase the loss. In addition to the costs and loss to the farmers, other related sectors such as poultry traders, feed mills, and breeding farms will also come under pressure.(Elamin, 2006) And this is going to be further compounded due to sharp shifts in market demand resulting from consumers reluctance and reduction in consuming meat and related products. Let us see what exactly is meant by demand and supply shifts. DEMAND AND SUPPLY Demand is the amount or the quantity of a product or service which is desired by buyers. This is also dependent on price and the relationship between price and amount of quantity demanded or simply the demand is known as the demand relationship. On the other hand, Supply refers to the quantity which can be offered or provided by the market at any given time. Again this too is dependent on price and the relationship between the two is called the supply relationship Equilibrium in economy occurs when the supply and demand are equal or when the amount of quantity demand is met by the amount of quantity being supplied. But this is possible only in theory as reaching the equilibrium is not possible in actuality. See Picture 1 for the equilibrium condition. Picture 1 : Equilibrium (Source : Investopedia.com, 2003). Disequilibrium whenever the price or quantity is not equal to P* or Q* as shown in Picture 1. Excess supply, excess demand or low supply and decline in demand can cause changes in economy. And when such a situation occurs even though the price remains constant, then it is know as the shift in a demand or supply curve. Thus in such a case, the quantity is being affected by a factor other than the price. Picture 2 – Shift in Demand curve. Thus in the case of Tatooine, the demand for chicken and other poultry products such as eggs etc will get drastically reduced, thus causing a shift in the demand curve. And for most companies, a bird flu epidemic will lead to a reduced demand for their products. Another problem may be that governments may impose travel restrictions. And they will in most probability impose quarantine restrictions on incoming shipments. Thus in such a scenario the people and packages will be delayed leading to more losses. But there may be some companies that will experience an increased demand in their products which will help people deal with and prevent a bird flu epidemic from spreading. These could be the pharmaceutical companies making flu vaccines or companies making surgical gloves and masks. As the epidemic will progress, international travel would also decline, as people will avoid the avian flu locations Thus the tourism and airline industry of Tatooine will also suffer. This has already been seen during the SARS outbreak in April 2003, as airline passenger arrivals in Hong Kong had declined by nearly two-thirds relative to their levels in March. (Siu and Wong, 2004) Activities such as leisure or going to malls , restaurants etc will decrease leading to decline in retail trade. Thus there will be general slowdown in economic sphere which might lead to lowering of gross domestic product (GDP) of Tatooine. Conclusion Thus we see that as a country facing avian flu epidemic, Tatooine is going to face a slowdown in economic activities leading to a decline in the GDP or the gross domestic product. Whether this slowdown will be severe or mild will depend largely on the nature and severity of the epidemic. Besides the sectors which will be directly hit such as Poultry farmers, breeding farms and traders etc, there will be indirect effect on other industries such as food or hospitality. To some extent, leisure buying and retail sector will also be hit. Another industry that may face recession will include tourism and airlines because of tourists who will stay away from the country. Domestic tourism will also take a hit with people preferring to stay at home. References Asian Development Bank. 2003. Hong Kong, China: Oxford University Press for the Asian Development Bank. Bloom, E., et al., 2005, ERD POLICY BRIEF NO. 42 , Potential Economic Impact of an Avian Flu Pandemic on Asia Cooper, S., and D. Coxe. 2005. An Investor’s Guide to Avian Flu.Montreal: BMO Nesbitt Burns Research. Demand and Supply, 2003, Retrieved from : http:// www. investopedia.com Elamin, A., 2006, World Bank outlines economic effects of bird flu Fan, E. 2003. SARS: Economic Impact and Implications. ERD Policy Brief No. 15, Economics and Research Department, Asian Development Bank, Manila. Meltzer, M., N. Cox, and K. Fukuda. 1999. “The Economic Impact of Pandemic Influenza in the United States: Priorities for Intervention.” Emerging Infectious Diseases 5(5):659-71. Siu, A. and Wong, R.,2004 Economic Impact of SARS: The Case of Hong Kong, Asian Economic Papers, vol. 3, no. 1 , p. 76. Read More