The World Health Organization has declared the COVID-19 (Corona Virus) a global pandemic. The COVID-19 outbreak has affected the majority of businesses across the globe. This includes both small and large business enterprises as well as the global market at large. The price of commodities has risen due to the decrease in their supply. Some of the basic commodities have gone out of stock while others are still available but in small amounts. Being a worldwide pandemic, every economy has been highly affected. The medical sector has been extremely affected as every country focuses on employing more health workers in an attempt to curb the spread of the virus. Research shows that most there is panic buying has been experienced in most countries across the globe. Vulnerable populations are at higher risk of these shortages due to socioeconomic inequalities. This paper, therefore, will discuss the impact of the COVID-19 on supply and demand theories.
Demand relates to how much goods and services consumers can afford at a given period. The law of demand identifies price as the major factor that determines what the customers are able and willing to buy. Other factors include the change in taste and preferences, quality of a commodity, the income of the consumers, and consumers’ expectations of future changes in prices. On the other hand, supply can be defined as the number of goods and services produced by manufacturers in a given period. It can also be defined as the quantity they avail in the market at a given period. Similarly, the amount available in the market by producers depends on how much it costs to produce them. In economics, the supply and demand for commodities are used to determine the market price of these commodities. When the quantity of goods demanded by consumers equals the number of goods supplied, an equilibrium achieved.
COVID-19 pandemic has raised major concerns on issues regarding medical supplies. Pharmaceuticals and medical products have become essential commodities during this pandemic. Ventilators, gloves, masks, gowns, and surgical drapes and hand sanitizers are among the main necessities at this time both for health care workers as well as the public as a whole. According to Gryta, T., & Adams, R. (2020), medical commodities are generally in shortage as it is difficult to import since the virus is across the World, and every government is working on fighting the various at home. Most countries, however, have been forced to start producing them locally. The continuous spread of the virus has increased the demand for testing equipment, ventilators, and other products. As a result, there is a possibility of shortages of these commodities as the virus continues to spread. In other words, the demand for equipment is higher than the supply in the market. The price of these commodities is lower than the equilibrium, thus resulting in excess demand. Excess demand results in more supply of commodities, and this competition leads to lower prices in the market. The lower price of the commodities may lead to low supply, thus a probability of higher prices in the future to achieve equilibrium (VIR, 2020). Also, it is not known how long it will take to curb the virus as no single vaccine has been identified so far. People are therefore flocking in shops and supermarkets as they prepare to fight the coronavirus. Prices of essentials are on the rise as there are shortages in the supply and availability of raw materials. Also, all governments have put in place strict measures in the attempt to stop or reduce further spread of the virus. This includes reduced movements of people, especially through flights (Gryta & Adams, 2020). Flights have been stopped in almost all countries across the globe, making it hard to acquire raw materials and other commodities from other countries. Besides, the virus has now spread in almost all countries in the world. As a result, all businesses have been affected in all countries.
Technological advancement in China makes it the leading country worldwide in the production and supply of commodities (Volkin, 2020). For instance, the high number of infections in the country forced the government to reduce exports of commodities for local use. As a result, countries depending mainly on China’s supplies have been largely affected by this pandemic as they have been left with no option but to depend on the limited resources in the countries.
Furthermore, the virus is spreading at a high rate such that every day, there are newly recorded cases. This means the demand for medical supplies is rising in every 24 hours. The demand for protectives such as masks and hand sanitizers is rapid as people are working on protecting themselves and their families at large. However, this demand is not experienced equally across the countries due to the gap in financial status. According to PYMNTS (2020), consumer behavior has changed as people have now shifted to e-commerce due to lockdowns. This limits the number of businesses on the operation as only a few have enrolled in online business. The financial markets have been greatly affected by the pandemic due to logistics in supplies involved. Despite the high risk of contracting the virus, these essentials remain unaffordable to these individuals; thus, this law does not apply.
Apart from healthcare-related businesses, the COVID-19 pandemic has affected all other businesses across the globe. The mode of transmission of the virus is the main concern, thus the closure of many businesses. For instance, the ban on the use of public transport in many countries has prevented people from going to work. Also, many countries have been on lockdown, while others are initiating curfews forcing people to work from home. This means small business operators cannot work as their businesses require them to be at the workplace for them to be operational (Abedejos, 2020). Also, the shortage of supplies has affected these businesses, forcing most of them to close down. Moreover, most IT companies have been forced to shut, as working from home rule out does not favor them. Also, a majority have reported delays in the delivery of the required tech hardware since the COVID-19 outbreak (Clark, 2020). This constrained supply has left people with no options than to switch to refurbished products. The social distance has also affected other businesses like restaurants. Almost all countries have issued a directive that minimizes the crowding of people in one place. The restaurants have been forced to stop their normal operation and adopt takeaway or online services. Also, most people now avoid eating from these restaurants in fear of contracting the virus. As a result, the demand for food in these restaurants has gone low. Most have been forced to close due to losses incurred and the inability to pay their employees.
In conclusion, the COVID-19 pandemic has affected all businesses across the globe. Despite the government pressures on trying to maintain normal prices of commodities, the scarcity of raw materials ends up raising the price of these commodities. The demand for medical commodities and protectives is in high demand. However, their availability has also been affected as the virus is still spreading. Besides, the curfews and lockdown have also affected the operation of many businesses, especially the small business operators who cannot work from home. The few who are operating have fewer operating hours while a majority can access raw materials or stock. However, the measures put by most governments are helpful despite the effects on these businesses as they will assist in preventing the spread of the virus.
References
Gryta, T., & Adams, R. (2020). Coronavirus Is Different. It’s Rapidly Hitting Supply and Demand. The Wall Street Journal.
Volkin, S. (2020). How has COVID-19 impacted supply chains around the World? Johns Hopkins Magazine.
PYMNTS. (2020). eCommerce Drives Industrial Real Estate Boom. The Register.
Abedejos, I. (2020). How COVID-19 Is Affecting Small Businesses and What Can You Do. Business 2 Community.
Clark, L. (2020). Supply, demand, and a scary mountain of debt: The challenges facing IT as COVID-19 grips the global economy. The Register.