Question

Our world has changed in many areas of the economy since the end of February. It has been many, many years since the United States has seen the shortages and surpluses that we have experienced recently. For your discussion forum this week, pick one of those areas where there has been a shortage, or a surplus. Explain how the changes in equilibrium were affected by demand and/or supply shifts. What happened to prices of that product? Has it changed anything about the way consumers shop or manufacturers produce that product?

Answer 1

Corona pandemic has created havoc in US. All the sectors in the economy has been affected by the virus. Market forces have been subjected to disruptions.

One of the products, that experienced a shortage is sanitisers.Since sanitisers became essential in the prevention of virus, demand for sanitisers grew by a large extent. On the other hand, due to supply side disruptions, supply experienced a fall. Result, was a shortage of sanitisers .

Equilibrium price of sanitisers increased. Price rise can be explains as follows.

Before the spread of the virus Equilibrium price was P determined the intersection of demand curve DD and supply curve SS.

After the spread of corona virus, demand for sanitisers faced an increase, as a result demand curve shited to right to D1D1 from DD.On the other hand, supply curve shifted to left to S1S1 from SS. Intersection of S1S1 with D1D1 resulted in an increase in equilibrium price from P to P1 as shown in the following diagram.

*In the present scenario, producers are trying their best to make sanitisers available in the market. sanitisers sales have surged , resulting in price-hikes and rationing.