The first thing I noticed people going crazy about was toilet paper. My friends and colleges everywhere were making sure they were stocked up. Then it was hand sanitizer and face masks. I read about E bay banning listing for masks, sanitizer and even disinfecting wipes after the price was running up.
For example there was a bottle of Purell being sold on E bay for $138.00. Amazon also buckled down on third-party sellers for price gouging, leaving one vendor to hoard over 17.000 bottles of sanitizer. The French government decided to not sell protective masks so that the corona-virus patients and medical workers could have access to them. It happened in other countries as well.
As the corona-virus started out breaking in the United States, we Americans cleared stores of toilet paper, paper towels, rice, bleach, and frozen foods. Retailers including Walmart successfully began putting rations on paper products by making managers force purchasing limits. My Facebook feed blew up with photos of the stores bare shelves and the stores closed early or opened later to try and keep their shelf’s stocked.
To start we have to understand supply and demand in the context of ‘shocks.’ A shock can be positive or negative and it can affect the supply and demand of our economy. So obviously a virus that comes out of nowhere is a shock to our economy. ‘shocks are unforeseeable and can be disruptive in various ways. We focus here on how they can disrupt the economy, but they can be socially disruptive or politically disruptive as well.’ – Public Health preservative A supply shock is something that affects our ability to produce and make stuff.
If a hurricane can wipe out infrastructures it would be thought of as a negative supply shock. Or if we invent something new that becomes productive and sells well, that a supply shock but in a good way. Hence the reason I say economically the corona virus ‘clearly fits description’ of a supply shock. As the virus spreads, it is affecting the soctiety’s ability to produce goods and services. It is a negative supply shock in this case.
A demand shock is similar to a supply shock, because it can also affect prices, but it truly affects aggregate demand. Where as economists think of the corona virus as being a supply shock, but supply shock creates demand shock. When the hand sanitizer and the respirators were in high demand but short of supply, you had a supply shock that interrupts production and causes all kinds of distributes in terms of getting good to the market.
At this same time, it has also created a huge increase in demand for some products. People were hoarding products and buying all the could, literally cleaned out shelf’s faster than the producers could restock and replenish the supply for the stores to keep their inventory.
The economy wants to know how economies will reckon from suffering from both supply and demand shocks. The way to think about the demand shock is to use the information that affects our expectations of what we might want to transpire in the future. Therefore this will probably last a long time, and will influence actions beyond anything economies can handle.
The demand shock is how people are projecting this to unravel. Since March life in America has been changing, and it will only continue to change. Amusement parks are such down, all sporting events have been canceled, and school and universities went to online one. The corona-virus has definitely had an effect on supply and demand.