Demand & Supply Analysis: Price Controls in Disasters

This essay uses demand and supply analysis to assess the case for implementing temporary price controls on essential goods during natural disasters and health crises, such as the COVID-19 pandemic. It begins by establishing the fundamental economic principles of supply and demand, emphasizing their direct relationship. The essay then examines how crises disrupt these dynamics, leading to increased demand and decreased supply for essential goods, resulting in inflated prices. The main body explores measures to control prices, including intensified production and supply regularization, the use of substitutes, and government subsidies. It also discusses the role of government-associated vendors in regulating prices and supply. The conclusion reinforces the importance of supply chain management and the need to ensure essential goods reach those who need them, thereby controlling prices during crises. The essay references relevant academic sources and news articles to support its arguments.

Using demand and supply analysis assess
the case for introducing temporary price
controls on essential goods during a
natural disaster or health crisis

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Supply and demand under economics is associated with carrying a positive relationship
and the theory of supply and demand states that these two variables are having direct
relationship with each other as when demand gets increased then supply will also be increased
to its inverse relationship (Supply and demand. 2021). This is the basic economic theory which
says that when any commodity is having high demand in the market then supply will gradually
be increased irrespective of other constraints such as customer needs and production capacity of
businesses. In terms of price this is stated in the theory that due to high demand prices of the
commodity may decrease only when other constraints are constant such as supply of that
commodity in the market. In the context of current health crisis of COVID irregularities of
prices has been seen for essential goods due to high demand and lowered supply. This essay is
covering those aspects which could be helpful to use for pricing control for essential goods
during this health crisis.
MAIN BODY
COVID is one of the current health crises which are faced by whole the world in recent
time. The whole economic system has devastated due to sudden outbreak of COVID in various
countries which left everyone hopeless and helpless. In the starting time of COVID the huge
demand of various essential products has arisen in the market and due to irregular supplies their
prices touched the sky and became exorbitant. For example in the starting of year 2020 the
demands for mask rose like never before and due to not so prominent supply prices for the same
commodity has increased and people started taking prices according to their volition. This was
the situation when exceptional commodity like essential goods has faced such issue of rising
prices as law of demand and supply is not applicable over essential commodities. In order to
channelize the same this was necessary to take preventive and acknowledgeable efforts so that
these situations can be tackled in appropriate manner and normal people do not face heavy
consequences and manage scarcity of commodities as well.
Right after the implication of COVID surge in demand of basic food and medical items
has been seen which left store with empty shelves, mismanagement systems and disappointed

people as well. In order to control the prices in health crisis of COVID this was mandatory to
use several measures through which these situation of expounding demands and prices rise can
be dealt with optimal efficacy. The pandemic COVID has given various implications to people
and economy as well (The case for avoiding price controls in times of crisis. 2021.). The
worldwide economy has seen one of the most significant down sloping movement due to which
demands for essential products surged and due to irregular supply prices were increased
exponentially. For manage the same there are some movements which could be helpful in
controlling prices on essential products during this pandemic which are elaborated as under:
Intensified Production and supply regularisation could be one of the best controlling
measures which can be used in order to manage price surging during health crisis. As
production capacities was not increased as in the proportion of market demand so this led in
rushing of prices and creation of uncontrollable situation on not meeting regular demands of
essential commodities in the marketplace. In order to manage this scenario the major step can
be setting up of such temporary plants those have high production capacity so that surging of
demand can be fulfilled by supplying appropriate ration of essential commodities. This could be
a helpful movement for controlling prices for essential goods in temporary manner. For
example in order to treat COVID a medicine named Remdesivir is used around the world and as
cases for COVID has spiked the demand for the same drug has also increased and for managing
the same government of UK imposed various limitations over using of this drug due to shortage
of production (UK Limits Remdesivir for COVID-19 Due to Rising Demand. 2021). For
managing this situation government initiated various plants and gave orders to various
companies so that needed demands can be met by producing such quantity of the drug.
Substitutes could also be the best option for controlling prices in health crisis of COVID as this
is not possible for intensify production in such early manner because may be the organisation
may not have such capacities of higher level production (Sarkis, and et. al., 2020). So in order
to deal with the same substitutes can be taken in the market so that to regularise supply and
control prices. For example in COVID time demands of oxygen has increased which lead in
surge of prices of oxygen cylinders due to minimised market supply of the same. In this
scenario using of oxygen concentration helped this situation to settle down and helped the

market to control prices of this commodity as in this time oxygen is falling under essential
goods category.
Regularising through subsidies can also be an option to control prices in health crisis. As
government can provide subsidies to essential medical products so that consumer can buy the
same in lowered prices and meet their level of demand. In this manner prices can be controlled
and demands can also be met by regularising the supply channels (Leibovici and Santacreu,
2020). On the other hand by establishing government associated vendors distributors will lead
to control the prices and demand, supply level for essential products.
CONCLUSION
From the above analysis this can be concluded that the major reason of increased prices
over the period for increased demand is irregular supply. That means when supply channels are
not appropriate then commodities will not react to its target customer and in this manner prices
will be escalated. In order to manage the same this is required to channelize supply in such a
way that this could reach out to people those needs the same. This way demands and supply can
be managed and prices can also be controlled for essential products during health crisis of
COVID.

REFERENCES
Books and journal
Leibovici, F. and Santacreu, A.M., 2020. International trade of essential goods during a
pandemic. Federal Reserve Bank of St. Louis, Research Division.
Sarkis, and et. al., 2020. A brave new world: Lessons from the COVID-19 pandemic for
transitioning to sustainable supply and production. Resources, conservation, and
recycling.
Online
The case for avoiding price controls in times of crisis. 2021. [Online] Available through<
https://theconversation.com/the-case-for-avoiding-price-controls-in-times-of-
crisis-they-dont-work-135218>
Supply and demand. 2021. [Online] Available through
hhttps://www.britannica.com/topic/supply-and-demand
UK Limits Remdesivir for COVID-19 Due to Rising Demand. 2021. [Online] Available
through< https://www.fdanews.com/articles/199414-uk-limits-remdesivir-for-
covid-19-due-to-rising-demand>