Question

The Covid19 pandemic has caused major shifts in supply and demand for various goods and services worldwide in only a few months. Applying the supply and demand model and market equilibrium framework discussed in this module:

1) Explain why it was so difficult to find face masks during the first few months of the pandemic or why you could only find them on secondary markets (ebay, amazon, etc.) for very high prices. Was it a change in demand, supply, or both that caused this to happen? Explain.

2) Explain why the price of gasoline has dropped significantly in the past few months since the pandemic began. Was it a change in demand, supply, or both that caused this to happen? Explain.

Answer 1

In the early stages of covid-19 when people did not know much about it and it suddenly increased, the demand for masks increased among people and supply was not that much and it was only online websites like Amazon, eBay etc. Was available through which it was being supplied at various places and thus prices were high in intial period vS demand supply gap was higher but as people got more information about it and started making masks at their level ,small and cottage industry,self help group and increased the supply which led to balance between demand and supply Due to this the market EQUILBRIUM was set equilibrium price and price goes down as well.

The main reason behind the increase in the price of gasoline was the increase in supply. That is, when people were using vehicles and means of transportation during the covid-19 lockdown, then its demand was reduced at the same time but the supply was still in progress, due to which its price continued to decrease.also demand decrease as people not allowed to go outside and this also dropped the prices.