AirAsia relies heavily on the new fleet of Airbus' A330s. Explain how economic slowdown due to COVID-19 cause Airbus to change its output of A330s in the short run. Draw a graph to show the effect of movement control order (MCO) on AirAsia's flight frequencies in the short run.

 

The economic slowdown indicates the reduction the economic activity in the economy. In this period, everyone in the economy starts spending less keeping future income in consideration which increases the national saving. Thus, the aggregate demand in the economy reduces.

The aggregate demand curve shows the negative relationship between price level and real GDP thus, aggregate demand curve is negatively sloped. On the other hand, the short run aggregate supply curve indicates the positive relationship between price level and real GDP. The intersection of these curves reflects the economic equilibrium. The reduction in aggregate demand due to economic slowdown causes to leftward shift in the aggregate demand curve and it leads to reduction in price level and real GDP. Graphically, it can be indicated as follows:

The reduction in real GDP of the economy shows that the income of the people decreases which reduces the demand of Airbus. Thus, the demand curve of the Airbus shifts leftward and it causes to reduction in price and output of Airbus in the short run. Graphically, it can be indicated as follows:

Owing to pandemic of Coronavirus, the movement control order of Asia reduces the frequency of AirAsia's flights. The government of country locked down the whole country due to coronavirus pandemic which reduces the movement of the people within and outside of the country. Thus, the demand of AirAsia's flights reduces. Thus, the demand curve of AirAsia's flight shifts leftward which causes the reduction in its price and quantity. It can be indicated graphically as follows:

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