When the COVID-19 virus began to spread in the U.S., people rushed to purchase hand sanitizer, disinfectant wipes, face masks and even toilet paper. This quickly shifted the supply and demand of these items and more.
In economics, supply and demand is the relationship between the quantity of an item produced and how much consumers are willing to pay for it. For example, because hand sanitizer would help protect against the virus, more people purchased it. In this situation, demand surpassed supply, leaving a shortage. To ensure the product still remained on shelves, prices increased—which reduced consumer demand.
Let’s look at another example. Several meat processing plants across the country were forced to shut down due to the virus. This resulted in less meat on the shelves in select stores, causing the price to increase. A similar story can be written for other grocery items like pasta and canned vegetables. In the month of April, it was reported that grocery store bills increased by 2.6 percent. The demand for these items increased, resulting in a price increase as well.
In some states, laws are in place to prevent supply and demand from dictating the price. For example, during a natural disaster, bottled water is typically in high demand. These laws prevent stores from hiking the price. However, by not letting supply and demand run its course, the water will sell out, leading to potential shortages.
The free market, for the most part, ensures that important commodities remain available during times of need. The pandemic is only the latest example of supply and demand at work.