In: Economics
Suppose individual X opened a supermarket just before lockdown commenced and does not offer online shopping. With the aid of a graph, illustrate and explain the effect on the change in demand for groceries on equilibrium price and quantity of groceries post-lockdown, ceteris
Due to lockdown in the situation of covid19, the demand of the
essential items like groceries increases. The people starts
demanding more of the products, but the supply of such products
falls due to less production of such products. Before covid19, the
prices were balanced as there was no overflow demand of customers.
But during and after lockdown, the demand suddenly increases which
effect the demand and supply graph of store. This was not due to
increase in prices by manufacturers or producers, but because of
less supply. To maintain the balance, the prices rises near about
64% of groceries.
Ceteris paribus refers to the effect of price on demand and supply
in the economy. This typically does not apply in real world.
Because there are many more factors which effect the demand and
supply of products.i990
Also, during lockdown the transportation and ordering techniques
has also changed. To avoid the risk of covid, people usually choose
to sit at home and order food or groceries items online only. The
supermarkets with no such facilities suffer a lot. Like in this
case, mr. X faces losses due to no online ordering facilities. This
reduces the demand of products from his store. And due to this he
have to reduce the price or use discount offer technique to attract
customers.
Therefore, post-lockdown, the prices rises till the supply
increases and become equal to demand. The quantity of groceries
fall, the price of such products rises. This effect could be
illustrated by given below graph: