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Christian Farlin

Professor Addler

ECON200 003

07 March 2022

Farlin ECON200 Signature Assignment: Gel Hand Sanitizer and COVID-19

An observed monumental shift in a major market is seen in the gel hand sanitizer

market’s changes in their supply and demand curves after the start of the COVID-19 pandemic.

Before the COVID-19 pandemic, the competitive market for gel hand sanitizer was in

equilibrium, as the quantity supplied by sellers like Purell equaled the quantity demanded by

consumers. The market for gel hand sanitizer was also elastic due to the presence of many

substitutes. If a consumer decided against purchasing bottles of gel hand sanitizer, they could

purchase disinfectant wipes, spray hand sanitizer, tissues, or even wash their hands at the nearest

restroom in its stead.

Figure 1: The quantity that

producers are willing to sell is

equivalent to the quantity that the

consumers are willing to buy at the

equilibrium price. The equilibrium

quantity is the total number of

bottles sold in 2019.

However, the COVID-19 pandemic drastically altered the relationship between the

supply and demand curves within the market for gel hand sanitizer. As the CDC revealed that gel

hand sanitizer was especially efficient in eradicating germs, the quantity demanded increased due
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to consumer paranoia and the impression that the price-per-bottle would drastically increase in

the near future. The pandemic itself also “reinforced the significance of regular hand sanitizing

and cleaning practices among consumers and [became the] prominent factor driving the market”

(GrandViewResearch). Thus, the “demand for hand hygiene products has been exceeding the

supply in both online as well as brick and mortar sale channels worldwide owing to the global

outbreak of the virus in a short time span” (GrandViewResearch). The quantity supplied was

relatively inelastic in the short run, as producers were unable to produce the new quantity desired

by the consumers. Additionally, rising unemployment and the rising costs of the ever-valuable

inputs for the good shifted the supply curve to the left. However, there are two possible curves

that describe the shift in supply and demand for gel hand sanitizer due to the COVID-19

pandemic: an inelastic demand curve in the immediate and short run, and a shortage of hand

sanitizer in the long run.

In the short run, which is designated as the past year, the demand curve quickly rotates

into an inelastic “I” shape, as many consumers were willing to pay extraordinarily high prices to

have the cherished sanitizer. Due to the loss of workers and rising cost of inputs, the supply

curve would shift to the left, which creates an equilibrium point at the higher price P2. Thus, the

quantity supplied decreases but the price increases. Unfortunately, the inelastic demand curve

has allowed opportunists to take advantage of the fears of consumers by selling the product at

extraordinarily high prices to these consumers. These price-gougers can sell above the new

market equilibrium price because the exorbitant prices are still within the consumer’s consumer

surplus—which is how much a customer is willing to pay for the good. As consumers were

desperate to obtain gel hand sanitizer during the first year of the pandemic, they were willing to

pay high prices to obtain hand sanitizer gel bottles. The difference between a price-gouger and a
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black market seller is that sellers in the black market often sell below the market price to provide

an alternative source for consumers, whereas scalpers take advantage of public-stirring events to

sell above the market equilibrium price.

Figure 2: Demand becomes inelastic

due to consumer perceptions, as the

threat of COVID spurred them into

paying any price for sanitizer. On the

other hand, supply is unable to adjust

to increasing demand immediately.

On the other hand, the ever-increasing demand coupled with the decreasing supply

creates a shortage in the short run, which widens as the short run frame of reference transforms

into the long run frame of reference. The long run represents the next year. The combination of

“enterprising sellers [who] charg[e] outrageously inflated prices” (TheNewYorkTimes) and the

inability of “manufacturers [to] create enough supply to meet the frenzied demand causes by

panic over coronavirus” (TheNewYorkTimes) ensure that the shortage will expand if the

coronavirus remains as a sizeable exogenic factor. The demand curve in the long run becomes

more elastic, as consumers instead purchase spray hand sanitizer or other substitutes over the

original gel hand sanitizer product. On the other hand, the supply curve becomes more elastic, as

producers like Purell either outsource more of their production or begin to technologically

automate their operations. Also, the producers adapt and demand fewer workers in the long run,

whereas the supply of unemployed workers increases in the long run as businesses close and
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downsize.

Normally, the presence of cheaper substitutes causes the demand curve of the original

good to decrease, which causes the quantity supplied to similarly decrease. Thus, the new

equilibrium point would similarly shift. However, the price of both the original good and all

other substitute goods similarly experiences either an inelastic demand curve or a shortage due to

similar consumer mindsets and spending strategies throughout the pandemic. Many individuals
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fight to obtain gel and wipe hand sanitizers, in addition to other germ-removing healthcare

products.

Experts argue that the market will eventually adjust, as either the producers will make

enough quantity to sate demand, or the pandemic will lessen, and demand will proportionally

lessen. However, “the demand for hand sanitizers grew by a tremendous 1400 percent, as

consumers raced to stock up as the coronavirus COVID-19 outbreak spread” (HPS). Demand can

increase by such a percentage because the quantity demanded is largely theoretical. Wanting

additional millions of bottles of gel sanitizer is different than having millions of additional

bottles of gel sanitizer produced. Producers may be hesitant to expand production to that scale, as

making millions of additional bottles of gel hand sanitizer includes expanding operations across

cities, states, or nations, which also entails the hiring of thousands of employees to run and

oversee factories. As the market is volatile, consumers could demand much smaller quantities of

the product in the next two years, which means that the millions of dollars spent in expanding

production will lead to a surplus of supplied goods and thus substantial loss.

Therefore, the market will be able to eventually force the quantity demanded to be

equivalent to the quantity supplied, the absurd quantities demanded by consumers ensure that it

will take years for the producers to make enough of the product to fulfill the quantity demanded.

Although both models are economically sound, the “correct” model is determined

through real-world application. If there were no substitutes or if the good was integral to the

consumer, the demand curve would be inelastic. However, government regulations against price-

gouging scalpers and the presence of substitutes will limit the price that the consumers are

willing to pay once they have time to adjust in the long run. On the other hand, the shortage of

hand sanitizer originated in the short run due to the quantity demanded exceeding quantity
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supplied--which is characterized as the first couple of months after many schools and businesses

closed in March 2020—widened throughout the duration of the pandemic, as stay-at-home

mandates, substitutes, increasingly-automated operations, and rising unemployment causes the

shortage to widen. Therefore, not only did the supply and demand curves comprising the market

for gel hand sanitizer change, but the shortage caused by increasingly elastic supply and demand

curves is a better representation of the change and the factors that caused the change.
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Works Cited

Farlin, Christian. “Farlin ECON Signature Assignment Visualized Data”.

https://docs.google.com/document/d/1x_qbEQESKP6DVPdbVGgMo9eAFFFPE27-

kPDdAIseR_s/edit?usp=sharing Accessed 08 March 2022.

Grand View Publishing. “Hand Sanitizer Market Size, Share & Trends Analysis Report By

Product (Gel, Foam, Liquid), By Distribution Channel (Hypermarket & Supermarket,

Drug Store, Specialty Store, Online), By Region, And Segment Forecasts, 2020 – 2027”.

GrandViewPublishing. https://www.grandviewresearch.com/industry-analysis/hand-

sanitizer-market Published April 2020. Accessed 08 March 2022.

Pigging. “COVID-19-The Demand For Hand Sanitizer and Increasing Production Capacity By

Pigging. HPS-Pigging.com. https://www.hps-pigging.com/covid-19-the-demand-for-

hand-sanitiser-and-increasing-production-capacity-by-pigging/ Published 29 September

2020. Accessed 08 March 2022.

Statista. “Sales growth of the leading hand sanitizer brands in the United States in 2019”.

Statista.com. https://www.statista.com/statistics/1050766/leading-us-hand-sanitizer-

brands-by-sales-growth/. Published August 2019. Accessed 08 March 2022.

Wirecutter. “Coronavirus Has Caused a Hand Sanitizer Shortage. What Should You Do?”

NYTimes.com.

https://www.nytimes.com/2020/03/11/smarter-living/wirecutter/coronavirus-hand-

sanitizer.html Published 11 March 2020. Accessed 08 March 2022.