Demand, Supply, and Equilibrium of a Particular Product (Short Paper)

DEMAND, SUPPLY, AND EQUILIBRIUM PRICE OF A PARTICULAR PRODUCT Abstract In this report we will be discussing the effects the Coronavirus Pandemic had on demand, supply, and equilibrium on our economy. Specifically we will be talking about the products that where most scares during the pandemic and the ones that weren’t used at all and how that is now affecting our economy since we are in the process of building it back up. One of the articles indicates how major retail stores didn’t take advantage of increasing prices on essential prices while small business did. It discusses how in the long run small business won’t be benefiting from that because of their lack of fairness during a crisis. The second article speaks on the rise of demand for oil now that the vaccines are being distributed easily and the encouragement to commute, travel and shop but the producers of oil are holding on pumping more oil at the time because of the benefits they are receiving from the high oil prices. Discussion I chose to analyze two articles that were about a year apart. With the pandemic that we experienced this past year I felt that it would be interesting to see how the economy has changed in these 12 months. The first article I want to discuss is one that was written May 20, 2020, it’s called “The Law of Supply and Demand Isn’t Fair” by Richard Thaler from the NYTimes. Thaler speaks on how the regular law of supply and demand was not used during the pandemic. Usually the law states that if there is a rise in price that usually leads to an increase in the quantity supplied of that good or service, while a fall in price will decrease the quantity supplied. The law of demand states that a rise in price of a good or service almost always decreases the quantity demanded of that good or service. Neither of these happened during 2020. Instead of prices rising like they usually would during a current crises so that the economy could get back to equilibrium prices and quantity again it instead stayed the same which caused for excess demand/shortage of toilet paper, hand sanitizer, masks, bottled water, etc. While big retailers abided by the social norms of fairness, that was not the same case with entrepreneurs. When the shortage of supplies started to affect the big retail stores consumers had to start looking at smaller businesses and while larger companies look at the long term goal small business are more interested in “ a quick buck” and took full advantage of the pandemic. This as well affected hospitals and medical facilities. Since the current vendors for medical supplies could not raise their current contract prices with these facilities when supply shortage started to hit these facilities had to start looking at other vendors and pay double the price for supplies. In the long run these small businesses might be winning at consumers expenses but the probability of consumers using them again after the pandemic is over is very low. The second article I decided to write about was one that was written on March 17, 2021, titled “Why $4-a-Gallon Gas May Be Coming Your Way This Summer” by Clifford Krauss also with The New York Times. According to the article now that the vaccines are being distributed worldwide there is an expected rise in the American economy this spring and summer with the encouragement for people to travel, shop and commute. As oil and gasoline supply curve increases the demand curve is increasing as well. In the article it states usually at this point when that happens production increases significantly until there is a surplus and there is equilibrium again, but that’s not the case this time. Over the past 14 years alone this has happened 3 times, but industry executives are resisting the production of oil now which would keep energy prices up as the economy recovers. Rene Ortiz one of the members of OPEC stated that group members needed higher oil prices to balance their budgets and service their debts, but some analysts expect that when OPEC meets again next month they will agree to allow more production which would then mean lower oil prices. Graphs Demand and Supply Chart $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 400 450 500 550 Quantity of Demand 600 650 700 Quanity of Supplied 750 800 Conclusion As we started the pandemic at the beginning of 2020, we went through a recession that affected every single American in some shape or form. As we see our economy trying to build itself again it’s difficult to look back and see articles describing the shortage of food and supplies that are needed for survival. I enjoyed reading about how big retail stores took in consideration the crises we were going through and didn’t take advantage of the situation for company gain. I believe that if that would have been the case, we wouldn’t have had just deaths of people infected but of people having malnutrition. As jobs are staring to hire again and our economy is trying to get back on its feet, I hope that the decision to raise gas prices is a positive move to restore our economy even though I do understand this will affect the working class families that drive older, less eco-friendly vehicles that consume a higher amount of fuel.