Deciphering Economic Effects of COVID-19

Abstract

The novel coronavirus disease (COVID-19) has led to tremendous positive and negative effects in various economies across different countries worldwide. Nonetheless, despite the difference in economic structures of countries, the major effects of COVID-19 on economies are similar but tend to vary in magnitude depending on the level of development and climatic conditions in different countries. In this respect, this chapter is aimed at providing a critical approach to understand the nature of the positive and negative effects of COVID-19 on economies using the aggregate supply and aggregate demand (AS-AD) model in contemporary economics. The basis for this approach is to decipher the economic effects of COVID-19 on economies worldwide with reference to the theoretical literature in economics on the operationalization of market forces illustratable with the AS-AD model. Be that as it may, comprehensive discussions regarding the economic effects of COVID-19 on economies will also encompass contemporary findings in empirical studies on COVID-19. As such, the chapter will demonstrate how contemporary theories pertaining to the AS-AD model can be applicable in explaining the economic effects of COVID-19.

1. Introduction

The novel coronavirus (COVID-19) is known to be a zoonotic virus classified to be a ribonucleic acid (RNA) virus in the family coronaviridae of the other Nidovirale. Pertaining to this, coronavirus is considered a family of viruses that cause respiratory infections, which were first isolated in 1937 and designated coronaviruses, because they have a crown-like appearance under microscopy in 1965 [1]. Ever since COVID-19 became a pandemic; its existence has led to many economic effects in various countries. Some of the effects can be considered as positive effects on the economy whereas other COVID-19 effects can be considered as negative (detrimental) effects on the economy.

Nonetheless, just as the magnitude of the effect of COVID-19 on individuals is found to vary depending on how strong an individual’s immune system is, the extent to which economies are positively or negatively affected by COVID-19 effects also varies depending on the level of development of different economies in different countries. There are so many studies done to assess the effect and impact of COVID-19 on the economy using different quantitative and qualitative approaches to analyzing the effects. However, this chapter provides a graphical analytical approach to the economic effects of COVID-19 with reference to contemporary economic principles and theories. This approach, unlike others, is meant to demonstrate how economic phenomena in theoretical literature are applicable to the resulting effects of COVID-19 on economies. Nonetheless, discussions will also be linked to findings in empirical studies to support the basis of inferences deduced from the graphical analysis.

2. Aggregate demand and supply model in the COVID-19 era

Socioeconomic effects of COVID-19 can be viewed from both the aggregate demand side and supply slide of the goods market. With regard to this, aggregate demand is basically a function of different levels of expenditures in the economy. In this respect, aggregate demand comprises consumption (C), investment (I), government expenditure (G), exports (X), and imports (I) in an open economy [2]. This can be mathematically written, as shown in Eq. (1).

$$\mathit{AD}=C+I+G+X-M$$E1

where $\mathrm{AD}=\mathrm{f}\left(\mathrm{C},\mathrm{I},\mathrm{G},\mathrm{X},\mathrm{M}\right).$

Henceforth, in contemporary economics, the aggregate demand curve is represented by a downward-sloping curve that indicates an inverse relationship between prices and quantities of goods in the market. With a view to this, Figure 1 shows a graphical presentation of phenomena pertaining to the AD.

Figure 1.

Aggregate demand (AD) model. Source: F Witika (2021).

Therefore, note that in Figure 1, the y-axis measures the level of prices of goods and services demanded in the economy and the X-axis measures the quantity of goods and services demanded in the economy. On the other hand, the aggregate supply model is basically a function of the natural rate of output ($Y_N$) and the difference between the actual price level (P) and the expected price ($P_E$) level. This is shown in Eq. (2).

$$\mathit{AS}=Y_N+a\left(P-P_E\right)$$E2

where $\mathit{AS}=f\left(Y_N,P,P_E\right)$

Moreover, $a$ measures how much output (Y = AS) responds to unexpected changes in prices (P). As such, since aggregate supply (AS) is basically the total supply (or output) of goods and services in the economy, we can let Y = AS, as shown in Eq. (3).

$$Y=Y_N+a\left(P-P_E\right)$$E3

Similarly, since aggregate demand (AD) is basically the total demand (or output) of goods and services in the economy, we can also let Y = AD, as shown in Eq. (4).

$$Y=C+I+G+X-M$$E4

Hence, in Eq. (3), Y denotes total output supplied whereas, in Eq. (4), it denotes the total output demanded in the economy. Therefore, the graphical presentation of the aggregate supply curve is shown in Figure 2.

Figure 2.

Aggregate supply (AS) model. Source: F Witika (2021).

Where LRAS indicates the long-run aggregate supply curve and SRAS indicates the short-run aggregate supply curve. Therefore, the combination of the aggregate supply (AS) and aggregate demand (AD) model leads to the derivation of the aggregate supply and aggregate demand model (AS-AD model), as presented in Figure 3.

Figure 3.

Aggregate supply and aggregate demand (AS-AD) model. Source: F Witika (2021).

Note that (in Figure 3), point E denotes the market equilibrium point where the quantity of goods and services supplied in the economy is equal to the quantity of goods and services demanded in the economy at which the short-run aggregate supply (SRAS) curve, long-run aggregate supply (LRAS) curve, and aggregate demand (AD) curve intersect. Using the AS-AD model, we can assume that before COVID-19, in the short run, economies on the global perspective were operating at the market equilibrium point E where the level of the price of goods supplied and demanded was at P and the quantity of goods and services supplied and demanded was at Q. With regard to this, according to a study done by the World Health Organization (WHO) aimed at investigating the number of deaths exhibited as a result of COVID-19 infections and providing estimates of the excess morality from a global perspective, on January 30, 2020, COVID-19 was declared a public health emergency of international concern (PHEIC) with an official death toll of 171. Nonetheless, by December 31, 2020, this figure stood at 1813, 188 deaths. Notwithstanding, preliminary estimates postulate that at least 3 million is the magnitude of global deaths attributed to the COVID-19 pandemic in totality. Hence, this represented about 1.2 million deaths than what was reported officially [3].

Therefore, the immediate socioeconomic effect of COVID-19 upon its emergence was high rates of death which had a direct negative effect on the short-run aggregate supply curve through its reduction of the labor force population in the short run as both some people that were actively seeking employment and others who were already employed became infected and lost their lives. Henceforth, the reduction in the labor force due to numerous deaths reported in daily cases shifted the short-run supply curve to the left, as shown in Figure 4.

Figure 4.

AS-AD model after COVID-19. Source: F Witika (2021).

In consequence, the shift of the short-run aggregate supply curve (SRAS) to the left as presented in Figure 4, in panel (A), indicates the immediate reduction in natural output ($Y_N$) as a result of the reduction in the labor force population due to increased numbers of deaths owing to COVID-19 spreading infections. As such, the immediate reduction in the labor force population led economies to move from the market equilibrium point E (before COVID-19) to the market equilibrium point $E_1$ after COVID-19. With a view to this, the reduction in the natural level of output $\left(Y_N\right)$ in economies triggered an increase in expected prices from $P_E$ to $P_{E1}$ as presented in Figure 4, in panel (A), because consumers or people began to expect that prices would go up due to lower productivity as a result of the reduced labor force population which indirectly would lead to higher costs of production and consequently, higher prices as firms intend to cover for the loss of labor incurred due to higher death rates perpetuated by COVID-19 infections. Besides that, the reduction in the natural level of output from $Y_N$ to $Y_{N1}$ implied that goods that were produced more efficiently before COVID-19 at the market equilibrium point E became scarce at the new market equilibrium point $E_1$ associated with a lower demographic structure due to COVID-19 deaths. As such, the scarcity of goods and services made most consumers expect increases in prices from $P_E$ to $P_{E1}$, as shown in Figure 4, in panel A. Moreover, the decrease in the short-run aggregate supply (SRAS) from SRAS to ${\mathit{\text{SRAS}}}_1$ implied a shift in the long-run aggregate supply curve from LRAS to ${\mathit{\text{LRAS}}}_1$ as a result of the immediate decline in the labor force population in the country.

Furthermore, the decrease in the labor force population due to severe COVID-19 deaths shifting the supply curve to the left and leading to a fall in the natural level of output also implied a decrease in the demand for goods and services indicated by the shift to the left in aggregate demand from AD to ${\mathit{AD}}_1$, as presented in Figure 4, in panel (B). This is essential because the reduction in the labor force population and perhaps other people outside the labor force population also imply that domestic consumption expenditure (C) reduced as some potential consumers in the labor force and outside the labor force that were infected with COVID-19 ended up dying as significant losses that formed part of the overall demand for goods and services in the economy. In this regard, the loss in potential supply and potential demand due to exhibited COVID-19 death rates in countries is indicated by both the shift in aggregate demand and aggregate supply to the left.

Consequently, in the medium run, economies moved from the market equilibrium point at E to $E_1$ and later to $E_2$ where the actual output (Y) produced in economies became far less than the natural level of output before COVID-19 ($Y_N$) and moderately less than the new natural level of output after COVID-19 ($Y_{N1}$). Hence, at the market equilibrium point $E_2$, the actual price of goods and services set by firms after COVID-19 was greater than the expected price of goods and services before COVID-19 (P $>P_E$). However, the actual price of goods and services set by firms after COVID-19 was less than the expected price of goods and services by consumers during the COVID-19 era (P $<P_{E1}$). This is because, immediately, COVID-19 led to high death rates in the short run and medium run, firms did not respond quickly to changes in the demand for goods and services considering the fall in the overall demand due to high death rates. As such, what consumers were expecting to be the price in the short run and medium run was higher than the actual price firms had set in the short run and medium run. However, in the long run, economies moved to the market equilibrium point $E_1$, were they begun producing at the natural level of output during the COVID-19 era at which the actual prices (P) firms were charging was adjusted to the magnitude of prices (equal to$P_{\mathit{E}1}$) greater than consumer’s expected prices ($P_E$) before the COVID-19 pandemic (at E). Notwithstanding, the natural level of output produced after COVID-19 at the market equilibrium point $E_1$ was not greater than what was initially produced at $E$ before COVID-19 led to a change in countries’ overall population which affected the demand and supply side in the short run, as presented in Figure 4, in Panel (B).

Moreover, according to Yoon and Lee [4], demographic change is one of the most important determinants of the future economic and social landscape. Numerous studies conducted by different researchers in the world have taken a step to investigate the effect that changes in the composition and size of the economy’s population may have on macroeconomic outcomes. In consequence, the majority of researchers postulate that demographic changes tend to affect economies through their influence on investment behavior, marginal propensities to save, labor market decisions, and aggregated demand and supply responses. Pertaining to this, in the medium to long run, Yoon and Lee [4] postulated that the aggregate supply of an economy can be altered significantly as a result of the propensity of changes in both the labor supply and productivity either considered to be exogenous or caused by changes in demographics. Therefore, due to the propensity to affect amounts and combinations by which an economy’s factor inputs are utilized, changes in demographics consequently affect economic growth. Over the short term, demographic transitions are likely to affect aggregate demand (AD) given the amount of consumption (C) and investment (I) which may depend critically on structural changes in the population’s age earning profiles [4]. This supports the basis for the phenomenon of the immediate economic effect of COVID-19, as illustrated in Figure 4.

When the COVID-19 disease became a pandemic, among the first, COVID-19 government restrictions were the lockdown implemented to reduce the spread of the virus. In consequence, the lockdown measure led to an immediate supply shock due to its negative effect on production activities, especially in manufacturing industries where 90% of operations rely on production activities. For other businesses, such as restaurants and those in the tourism sector, the lockdown meant a complete shutdown of their operations which in consequence led to a loss of huge amounts of profit in firms. Besides that, farming businesses were also heavily affected by the COVID-19 restriction of the lockdown as farmers were forced to abandon all farming activities. Moreover, in developing countries, such as Zambia where farmers mainly depend on daily farming activities to generate income for survival, the lockdown forced farmers to end up beginning to consume their farm produce to survive. This led to an increase in food insecurity and lower productivity of goods and services in developing countries. As such, in the short run, the immediate effect of the COVID-19 lockdown was a decrease in the natural level of output from $Y_{N1}$ to $Y_{N2}$ (shown in Figure 5) which consequently led to an increase in the expected price of goods and services as consumers speculated that the decrease in the quantity supplied would lead to scarcity which in turn would induce firms to increase prices. Pertaining to this, the fall in the supply of goods and services after the COVID-19 lockdown is presented by the shift in the aggregate supply curve to the left from ${\mathit{\text{SRAS}}}_1$ to ${\mathit{\text{SRAS}}}_2$ (as shown in Figure 5 in panel (C)) following the movement of the economy from the market equilibrium point $E_1$ (before the lockdown) to $E_3$ (after the lockdown).

Figure 5.

AS-AD model after COVID-19 government restrictions source: F Witika (2021).

More than that, the shift in the short-run aggregate supply curve to the left from ${\mathit{\text{SRAS}}}_1$ to ${\mathit{\text{SRAS}}}_2$ also imply a shift in the long-run aggregate supply curve to the left from ${\mathit{\text{LRAS}}}_1$ to ${\mathit{\text{LRAS}}}_2$ due to the reduction in the production capabilities after the implementation of the COVID-19 lockdown, as presented in Figure 5, in panel (D). In this regard, the economy moved from the market equilibrium point $E_1$ to the new market equilibrium point $E_3$. However in the medium run, as the natural level of output decreased in many countries from $Y_{N1}$ to $Y_{N2}$, due to the scarcity and shortage of goods and services during the lockdown as companies closed down, the demand for goods and services by people in the economy increased; firms that could still provide some goods and services even during the lockdown whilst maintaining taking into consideration of other COVID-19 restrictions increased their prices as their output decreased and in response to the increased demand. With a view to this, the increase in the demand for goods and services during the COVID-19 lockdown imply there was a shift in the aggregate demand curve to the right from AD to ${\mathit{AD}}_2$ as the economy moved from the market equilibrium point $E_3$ to $E_4$ in the medium run, as shown in Figure 5, in panel (D).

In consequence, at the new market equilibrium point $E_4$ during the COVID-19 lockdown, the actual price set by firms denoted as P of the actual level of output supplied at Y was greater than the expected price by consumers (as shown in Figure 5, in panel (D)). Hence, in the medium run, firms charged prices that were higher than what consumers expected. Moreover, due to the higher demand for goods and services during the lockdown and other COVID-19 restrictions, some firms whose operation was not completely shut down increased their output such that the level of actual output produced at Y became higher than the natural level of output at $Y_{N2}$ in the medium run but not greater than the natural level of output firms could produce before the COVID-19 lockdown and other restrictions at $E_1$ denoted by $Y_{N1}$ (as shown in Figure 5, in panel (D)). Nonetheless, in the long run, economies returned to the market equilibrium point $E_3$ at which they were producing at the natural level of output denoted by $Y_{N2}$ (shown in Figure 5). As such, the expected price by consumers charged by firms became equal to the actual price charged by firms during the lockdown and other COVID-19 restrictions. Be that as it may, the expected price by consumers during the lockdown and other COVID-19 restrictions at the equilibrium market point $E_3$ was higher than the expected price by consumers at the market equilibrium point $E_1$ before the COVID-19 lockdown and other restrictions, as illustrated in Figure 5, in panel (D).

In relation to the graphical analysis in Figure 5, according to the UNDP revised business survey report in Zambia, COVID-19 has adversely affected business operations with 71% of the respondents indicating that they were partially closed while 14% of businesses were totally closed. Only 15% reported having maintained normal operations. More than that, the study found that COVID-19 has caused a number of challenges to enterprises, with the most significant challenges being the loss of customers rated 77.3% of the total responding enterprises. Other reported challenges include supply chain cuts at 37.7%, high commodity prices or material prices reported at 36.0%, and problems with late payments at 32.3% among others. These challenges are expected to affect operating revenue for enterprises [5].

According to classical economics, in the labor market, the number of individuals in the economy willing to work and others working in the labor force is indicated by the supply of labor (denoted by $S_{\mathit{\text{labour}}}$ in Figure 6). In this regard, people in the labor force are suppliers of labor in the market whereas firms are buyers of labor supplied by individuals in the market. As such, the demand curve denoted by $D_{\mathit{\text{Demand}}}$ in Figure 6 measures the amount of labor demanded by firms in the market. More than that, in Figure 6, $W_1$ and $W_2$ denote the wage rate whereas $Q_1$ and $Q_2$ denote the amount of labor demanded and supplied in the economy. As such, the quantity of labor demanded by firms and supplied by individuals in the market indicates the magnitude to which there is employment and unemployment in the economy.

Figure 6.

Labor market model after COVID-19 government restrictions. Source: F Witika (2021).

Therefore, assuming that economies were operating at the labor market equilibrium point $E_1$ before the COVID-19 pandemic, the amount of labor supplied by individuals in the market and the amount of labor demanded by firms in the market was at $Q_1$ (as shown in Figure 6). Besides that, firms were willing to pay workers at the wage rate of $W_1$ and workers were also willing to work at that particular wage rate. However, after the COVID-19 pandemic and government restrictions, such as the lockdown, social distancing, and work at home policies, due to the lower productivity exhibited during the lockdown and work at home policies, the demand for labor by firms decreased. With regard to this, the decrease in the demand for labor by firms during the COVID-19 lockdown and work at home policies led to a decrease in the amount of labor used by firms indicated by the decrease in the quantity of labor from $Q_1$ to $Q_2$ and the corresponding decrease in the wage rate from $W_1$ to $W_2$ as economies moved from the labor market equilibrium point $E_1$ (before COVID-19) to $E_2$ (after COVID-19), as shown in Figure 6. Henceforth, the decrease in the quantity of labor from $Q_1$ to $Q_2$ indicates an increase in unemployment due to lower productivity exhibited in the COVID-19 era.

Besides, according to the UNDP revised survey report, some businesses in Zambia have begun disseminating information to employees about layoffs and issues to do with reducing salaries. This situation was reported by 37.3% of the total responding enterprises in Zambia and primarily done by businesses to keep up with the negative consequences of COVID-19 on business operations. In addition, 33.6% of the reports in Zambia were based on flexible shifts and working from home activities undertaken by businesses whereas 22.8% and 16.9% were reports received with regards to enterprises that completely shut down operations and those that exhibited resumptions of work and productivity, respectively [5].

The global coronavirus pandemic (COVID-19) dramatically slowed economic activity as governments implemented lockdown measures; individuals reacted by reducing both their mobility and economic activity, and firms’ production processes were disrupted. These broader shifts in the economy affected both firm’s demand for labor and workers’ ability and willingness to work. In developed countries where data are readily available, market impacts varied considerably across countries, depending on initial economic and labor market conditions and variations in policy responses [6].

The emergence of COVID-19 as a pandemic led to some positive and negative effects. With regards to this, in the goods market, due to COVID-19 restrictions, such as the restrictions on movements and immigrations, which in consequence led to the closure of borders across countries, the aggregate demand in countries declined following the reduction in exports (Y=C + I + G+($\downarrow$ X) $-$ M). Hence, countries exhibited supply shocks in international markets which also led to a reduction in prices and loss of foreign exchange. In Figure 7, this is indicated by the shift in the aggregate demand (AD) curve in the goods market from ${\mathit{AD}}_1$ to ${\mathit{AD}}_2$. Pertaining to this, as economies moved from the market equilibrium point $E_1$ to $E_2$, their output decreased from $Q_1$ to $Q_2$ as prices declined from $P_1$ to $P_2$ (as presented in Figure 7). A comprehensive study was undertaken to investigate the impact of COVID-19 on least developed countries conducted by the United Nations in 2021 found that due to the COVID-19 pandemic, the majority of least developed countries exhibited a reduction in external (or foreign) demand. In addition, LDCs also experienced a decline in prices of important commodities, such as oil and a large decrease in tourism demand. In consequence, this led to a decline in foreign direct investment, challenges with regards to debt payments and remittances were highly expected to fall [7].

Figure 7.

Positive and negative effects of COVID-19 and government restrictions. Source: F Witika (2021).

Furthermore, due to the lockdown measures and work at home policies aimed at reducing the spread of COVID-19 infections, the closure of many businesses and other organizations in the economies led to lower productivity. As such, the decline in productivity negatively affected the production capacities of firms in economies which led to lower economic output indicated by the shift in the aggregate supply curve from ${\mathit{AS}}_1$ to ${\mathit{AS}}_2$ (in Figure 7). With a view to this, the decrease in the supply of goods and services in the goods market as economies moved from the market equilibrium point $E_2$ to $E_3$ led to an increase in the general price level from $P_2$ to $P_3,$ as shown in Figure 7. Pertaining to this, World Bank conducted an assessment in 2020 to establish effects of COVID-19 in the East and Pacific (EAP) region and found that the negative effects of COVID-19 on firms in East Asia and Pacific (EAP) region were extremely high. With a view to this, the sales of firms and employment in the regions highly declined due to the COVID-19 pandemic. Particularly, the sales of firms in some EAP countries exhibited a 38–58% decrease in sales during the period between April and May in 2020 relative to the time period between the same months in 2019. Besides that, World Bank postulated that small and medium-sized enterprises (SMEs) were the most negatively affected entities by the COVID-19 pandemic. More than that, World Bank further proposed that the pandemic is likely to have a negative lasting impact on productivity and consequently deter growth due to high indebtedness by firms and increased uncertainty which are detrimental to the magnitude of investments. Besides that, World Bank also suggested that firm closures and high unemployment exhibited during the COVID-19 era will lead to a loss of valuable intangible assets [8].

Subsequently, after the COVID-19 pandemic and government restrictions pertaining to the lockdown and stay at home policies, as economies moved from the labor market equilibrium point $E_1$ to $E_2$ (as presented in Figure 7), due to lower levels of productivity as a result of the disruption in normal working activities, the demand for labor by firms reduced from $Q_1$ to $Q_2$ and firms became willing to pay workers lower wagers from $\dot{W_1}$ to $\dot{W_2}$ (as shown in Figure 7). With a view to this, the decrease in the demand for labor during the lockdown and work at the home policy is indicated by the shift in the demand curve for labor from $D_{\mathit{\text{labour}}1}$ to $D_{\mathit{\text{labour}}2}$ assuming that the supply for labor remained constant as indicated by the unchanged supply curve for labor (shown in Figure 7). In relation to this, the global coronavirus pandemic dramatically slowed economic activity as governments implemented lockdown measures that restricted mobility and firm production processes. As such, the shifts in such dimensions of economic activity consequently had tremendous effects on both the demand for labor by firms and the ability and willingness of people to work [6].

Notwithstanding, government expenditure and private consumption on healthcare services directed toward the ultimate goal of treating COVID-19 infections increased in the healthcare services market in economies around the world. With a view to this, the increase in government expenditure and private consumption of medical facilities or services during the COVID-19 pandemic, in Figure 7, is represented by the shift in aggregate demand from $D_1$ (Y = ($C$) + I +(G) + X-M) to $D_2$ (Y = ($\uparrow C$) + I + ($\uparrow$ G) + X-M) as economies moved from the healthcare services market equilibrium point $E_3$ to the new healthcare services market equilibrium point $E_3\prime$ after the COVID-19 pandemic (as shown in Figure 7). However, due to the increase in the demand for healthcare services during the COVID-19 era, firms such as hospitals, clinics, and medical centers increased the supply of healthcare services to meet the unexpected increased demand from $\dot{Q_3}\prime$ to $\dot{Q_4}$ as the economy moved from the healthcare services market equilibrium point $E_3^{\prime }$ to $E_4$ indicated by the shift in the supply curve from $S_2$ to $S_4,$ as shown in Figure 7. Though not socially viewed as a positive effect of COVID-19 on economies, the increased private consumption and government expenditure on healthcare services is a positive economic effect in the sense that it led to more income generated from the purchase or expenditure on COVID-19 prevention materials, such as ventilators, face masks, hand sanitizers, and other COVID-19 prevention tools. In addition, other expenses on healthcare services include investment in COVID-19 vaccinations worldwide; all these forms of expenditure led to an increase in output in economies which contributed to the increase in quantity supplied in the goods market indicated by the shift in aggregate supply to the right, from ${\mathit{AS}}_2$ to ${\mathit{AS}}_3$ as the output of healthcare services and products supplied and demanded increased from $Q_3$ to $Q_4$ (as shown in Figure 7).

The rapid spread of COVID-19 renewed the focus on how health systems across the globe are financed, especially during public health emergencies. In 2019, during the first periods after the outbreak of COVID-19, it was reported that spending on health care services increased to $8.8 trillion or $1132 per person. However, it was noticed that there were variations with regard to healthcare expenditures within and across different income groups and geographical regions. Moreover, it was estimated that an amount of $54.8 billion was disbursed in 2020 with the ultimate goal of investing in health to assist countries worldwide. Pertaining to this, $13.77 billion was directed toward projects put in place to deal with COVID-19 cases, issues, or health-related problems. Contemporary issues regarding the magnitude of income spent on health have long been of interest with the considering of good health as a fundamental force of human life which is part of social and economic objectives countries intend to achieve. Moreover, the realization of the importance of health worldwide also forms the basis for the ultimate goal of providing assistance in health services globally to attain universal health coverage. However, the COVID-19 pandemic has led to a revolution with regards to the interest toward health financing in the past, present, and the future partially due to the fact that the propensity to respond to the COVID-19 pandemic has been and continues to be tremendously costly globally [9].

More than that, due to the increased number of deaths in many countries as a result of COVID-19 infections, there was an increase in the number of coffins or caskets supplied to meet the unexpected increase in the demand for coffins or caskets; other countries exhibited a shortage in the number of coffins supplied relative to the demand for coffins. As such, in the short run, the increased number of COVID-19 cases of deaths led to an increase in the demand for coffins indicated by the shift in the demand curve for coffins from $D_1$ to $D_2$ as economies moved from the coffins or casket market equilibrium point $E_3$ to $E_3\prime$ (as shown in Figure 7). In consequence, firms were induced to supply more coffins or caskets to meet the unexpected demand for coffins in the market. As such, the increase in the supply of coffins or caskets from $\dot{Q_3}\prime$ to $\dot{Q_4}$ is indicated by the shift in the supply curve from $S_2$ to $S_3$ (in Figure 7). From an economic perspective, the increase in the supply of coffins or caskets was a positive effect on the economy because it led to significant contributions to the overall output produced in the economy from $\dot{Q_3}\prime$ to $\dot{Q_4}$ (as shown in Figure 7). Nonetheless, from a social perspective, the increase in the supply of coffins due to the increased demand for coffins was an indication of the loss of lives which is negative to the welfare of society.

Moreover, in an article titled, “Coffin production in South Africa” written by Kizzi Asala in 2020, it was postulated that South Africa was the most affected country by the COVID-19 pandemic on the African continent with 1.3 million confirmed cases and over 40, 000 deaths, based on latest data from the country’s health development indicators. Besides that, the funeral industry has been under great pressure following high death rates exhibited which in consequence have been prompting coffin makers and undertakers to respond to the unexpected increase in demand for coffins or caskets while navigating a mini-crisis of production shortages in the market. Pertaining to this, many people had resorted to expressing their concerns on social media regarding the delay in making funeral arrangements because of the coffin shortages. While coffin makers have been working double shifts to make up for the shortfall, the deputy president of the National Funeral Directors Association, Dr. Lawrence Konyana postulated that the shortage was particularly evident in the Western and Eastern Cape, which had recorded the most deaths. Subsequently, there was an unexpected increase in the number of COVID-19 cases in South Africa from 3000 daily cases in December to more than 20,000 daily COVID-19 cases by the end of December. As a result, there was a shift in the magnitude of the productivity of coffins or caskets such that one manufacturer that could make about 2000 coffins within a week began to produce between 3000 and 4000 coffins per week in response to the unexpected increase in the demand for coffins [10].

While the majority of businesses exhibited a complete shutdown with regards to their operations during the COVID-19 pandemic following government restrictions pertaining to the lockdown intended to reduce the spread of the COVID-19 disease, the coffin-making factory remained in operation particularly in the town of Jussey in northeastern France but could hardly keep up with meeting the demand for coffins in the market. With regards to this, nearly 60,000 COVID-19 cases were confirmed in France with 5387 deaths exhibited on a Friday. As such, this was recorded as the fourth highest tally in the world.

Furthermore, with the ongoing COVID-19 pandemic, the magnitude of the rate at which coffins were been produced increased to 50 coffins a day. Notwithstanding, another coffin-making factory located near ALPs in Eastern France was producing coffins of about 114, 000 a year which made it to be ranked as the country’s biggest producer of coffins or caskets. Unfortunately, it was found that a town lying between Paris and the east of France with about 1, 600 inhabitants around the regions at the epicenter of the COVID-19 pandemic accounts for more than 50% of the country’s death toll. With regard to this, in 2020, Garret postulated that it is clear that in terms of economic activity, the market for coffins or caskets is where the demand is now strongest. He further claims that in a coffin-making factory, about120 employees beaver away assembling coffins that usually sell for between 700 euros ($756) and 5, 000 euros a piece [11].

Furthermore, due to the COVID-19 lockdown and work at home policies, there was an increase in digital networking, online business marketing, online transactions, online game consumption, and income generated by social media platforms due to more online activities. With a view to this, there was an increase in the consumption of electronic services (E-services) on the internet. This is mainly because the lockdown led to little or no physical activity but more online activity as the internet happened to be a safer place where individuals had nothing to worry about wearing masks, social distancing, or other COVID-19 restrictions. As such, most individuals were forced to transition from doing their daily business activities physically to using online platforms on the internet. Therefore, the increase in the demand for E-services, such as social media, online marketing, online business transactions, and digital networking, is represented by the shift in the demand curve for E-services from $D_1$ to $D_{2,}$ as presented in Figure 7, as economies moved from the E-services market equilibrium point $E_3$ to $E_3\prime$ along the supply curve $S_1$. However, to meet the demand in the market, software engineers, computer scientists, and other entrepreneurs in web designing and software development became more motivated to supply more E-services that can be accessed by consumers indicated (in Figure 7) by the shift in the supply curve to the right from $S_2$ to $S_3$ as economies moved from the E-services market equilibrium point $E_3\prime$ to $E_4$ leading to an increase in output from $Q_3\prime$ to $Q_4$ and decrease in prices due to competition in the market from $P_3$ to $P_4$.

Additionally, the United Nations Conference on Trade and Development (UNCTAD) conducted a study to assess how COVID-19 triggered the digital and e-commerce turning point and concluded that in years to come, 2020 will be viewed as the moment that changed everything. In this respect, UNCTAD argues that there has never been a time anywhere in the world when unprecedented and unforeseen growth occurred in digital and e-commerce sectors like it has occurred during the COVID-19 pandemic following government restrictions and other COVID-19 preventive mechanisms. In this regard, the COVID-19 pandemic is postulated to have fostered technological advancement with regard to e-commerce and digital transformation. As such, this COVID-19 effect on e-commerce and digital transformation can be viewed as another positive effect of the COVID-29 pandemic on economic activity. During the lockdown as a result of the COVID-19 pandemic, the majority of businesses and consumers resorted to utilizing more digital and online services to provide and purchase more goods and services when the lockdown became the new normal. In consequence, this led to a significant rise in the share of e-commerce across the globe with regards to retail trade from the magnitude of 14% in 2019 to the magnitude of 17% in 2020. Moreover, these results and other findings are presented in a new report produced by UNCTAD titled “Covid-19 and e-commerce.” At an event to release the report, UN general assembly president Volkan Bozkin postulated that the trend toward e-commerce is likely to continue throughout the recovery from COVID-19 [12].

Nonetheless, the increase in the demand for E-services due to the lockdown and work at home policies also motivated criminals to venture into cybercrime activities, such as hacking, online shopping fraud, vishing, and mobile money fraud among a few. Therefore, in the market of cybercrime, the supply of cybercrime increased from $S_2$ to $S_3$ along with the demand ($D_1$) or measure of cybercrime tolerance by people accessing E-services (as shown in Figure 7). From an economic perspective, the impact of an increase in cybercrime as either positive or negative on economies is subject to debate; it can be positive if criminals use the stolen income to invest in businesses that end up yielding significant contributions to economic growth. In this regard, the only negative outcome would lie in the transfer of resources from those who deserve and own them to those who do not deserve and own them (criminals) illegally. However, depending on how criminals may decide to use the stolen income, their activities may have positive or negative effects on the economy. Nonetheless, from the social perspective, the increase in the supply of cybercrime during the COVID-19 lockdown and stay-at-home policies is negative as it implied an increase in the probability for individuals to lose resources online via scams, hacking, vishing, or mobile money fraud.

In conventional markets, prices serve as a wealth transfer instrument that regulates the exchange of goods and services. In the case of cybercrimes, wealth is moved between the defender and the hacker. For example, when a hacker breaches a company’s server to steal customer information, the company offers a loss in terms of reputation damage, customer redness, compensation, or fines payable to regulatory agencies. The hacker can benefit from fame, selling valuable customer information such as credit data or directly using the data for fraudulent behaviors or exploitations, such as email scams or business process compromises. If hacking increases, the defender’s loss of wealth and the defender’s tolerance (demand) for cybercrime decreases, and they will have a greater incentive to reduce the loss by spending more protection, such as conducting security audits to reduce system bugs or cyber security awareness training [13].

With a view to cybercrime, an INTERPOL assessment of the impact of COVID-19 on cybercrime has shown that cybercriminals have transitioned from targeting only individuals and small businesses to major big corporations, governments, and critical infrastructure. With organizations and businesses rapidly deploying remote systems and networks to support staff working from home, criminals are also taking advantage of increased security vulnerabilities to steal data, generate profits, and cause disruptions. In one to four-month periods (January to April), some 907, 000 spam messages, 737 incidents related to malware, and 48, 000 malicious URLs, all related to COVID-19 were detected by one of INTERPOL’s private sector partners. According to INTERPOL’s assessment of the cybercrime landscape in relation to the COVID-19 pandemic, cybercriminals entice victims into providing their personal data and downloading malicious content. Around two-thirds of member countries that responded to the global cybercrime, the survey reported significant use of COVID-19 themes for phishing and online fraud ever since the COVID-19 pandemic [14].

3. Conclusion

Inasmuch as the COVID-19 pandemic had led to both positive and negative effects on economies worldwide, the magnitude of negative effects of COVID-19 on economies outweighs the magnitude of positive effects. On average, the supply side with regard to economic activities in countries was largely affected which in consequence also negatively affected consumers (on the demand side). To recover from the negative impacts of COVID-19 on economies, it would be fundamental for all countries worldwide to adopt new contemporary policies regarding the use of vaccinations to reduce the spread of COVID-19 rather than government restrictions, such as the lockdown, work from home policies, restrictions on immigration and exports, which have greatly contributed to negative effects of COVID-19 on the economic performance across countries.

Conflict of interest

The author declares no conflict of interest.