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10 November 2020

Market Forces

An online author of Quartz Mary Hui noted that on the Quartz Newspaper dated 4

February 2020 ‘The scramble for masks amid the coronavirus outbreak is a crash course in Econ

101.’ “Across China and in Hong Kong, but also as far afield as San Francisco and Rome, stores

shelves have been swept clean of face masks amid surging demand. One approach, offered by

most economists, id to let the market forces do the work. This means allowing sellers to charge

higher prices in response to surging demand.”

During the corona virus outbreak, the demand and supply of masks around the world had

skyrocketed. When supply and demand cause higher prices, it’s a powerful signal to the market

that more supply is needed. An increased demand on a certain product can decrease the value of

the specific produce. The consumption rate of products doesn’t highly affect the prices of a

product or service delivered. Both the demand and the supply can be high, this doesn’t have to

change the pricing rates at the consumers point. The supply and the demand can both correspond

together.

When a shortage of a given product is in the market, increased demand on a certain

product will lead to increased production of the specified product. After a short period of time

the shelves at the stores will be full with the given product that was in high demand. Since most

people will have already have purchased the specified product earlier on and they have a full
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stock at their homes. The given product will stay lying at the shelf for a couple of days without

being bought.

High production of a product which is in shortage may lead to losses because the

shoppers might have changed their minds. It is therefore not advisable to have a bulk stock. In

this case if the owner of the store had bought and restocked goods that were perishable it would

have forced either the shopkeeper to reduce the cost of selling, use them for promotion offers or

give them away

An increase in demand will actually cause an increase in supply which will later cause an

increase on the production of the given product. When the product of the goods becomes much

and surpasses the rate at which consumers are either purchasing or consuming the goods, the

prices will automatically reduce. Thus, and increase in production of goods does not significantly

affect the cost of the product on the market

In conclusion, the increased demand does not necessarily mean that the purchase price

will also increase due to low supply. The supply will be increased and the both the demand and

price will fall down

References

i. https://qz.com/1793749/wuhan-coronavirus-mask-shortage-illustrates-basic-economic-

theory