Under normal circumstances, the laws of supply are one of the fundamentals in microeconomics determining price levels within a market place.
We are not, however, in normal times . When Covid 19 first raised its ugly head (do viruses have heads ? Microbiologists essay question) early February, for me anyway, the questions started to arise concerning supply chains from China .
The intials concerns were are we going to get stuff …and when ? Thus intimating there maybe shortages. There was no hint of any price increases, apart from higher shipping costs if manufacturers such as Land Rover started to air freight parts. This rapidly changed to panic buying of product buying of product such as Toilet Rolls and sanitisers. Again no price risers. Or rather not by reputable traders, you cannot take idiots and profiteers as part of the Laws of Supply and Demand. They are, essentially, the laws of the black market. Move on rapidly again and we have economic concern of no demand (apart from food, medicine and Netflix subs), perhaps ‘takeaways’. Lack of demand and prices fall. Rather they should, but with few exceptions (oil) this is not necessarily the case. I think the implication here , is that the retailer is taking the view if nobody is coming into my shop, what is the point of dropping my prices and taking even less money. What they are doing , or at least some, they are offering additional services such as free local delivery.
Now I am not an economist. Hang on a mo…I am. I am the proud owner of a mediocre Economics A Level, achieved after much hardship in the early seventies. Hardship as I was forced to write the papers with an ‘Osmoroid Pen’ (image below). As to those close to me will know I am not known for my copperplate handwriting. I would be proud to lay claim to my eloquent academic prose seemingly making the pages bleed with detailed analysis. But I cant . They bled because the ink ran all over the paper. Julia, also, adds I was just plain lazy.
Osmiroid Pen Set – with explanations for those that have never seen a cartridge pen ! Or ‘How I make a page bleed’
I can also lay claim to knowing Adam Smith, not the Adam Smith(he died in 1790), but that’s not the point. It enhances my mediocre ‘A’ Level by association. Instead of claiming I am from the school of Adam Smith Economics, I can say that I did Economics, at a School where there was an Adam Smith. I digress…I go back to ….. I am not an economist but the Laws of Supply and Demand do not generally involve Moral and Ethical influences. They do involve human behaviour but currently , and I really do mean the ‘immediate’ now , as things are changing so fast, the moral and ethical factors are, I believe, having an impact upon the Laws of Supply and Demand.
There is, now a third unknown . Most of the time these laws operate in democratic capitalist societies. What we are now, temporarily, experiencing is the suspension of capitalism with massive state intervention (certainly in the UK) and that is with a right of centre, libertarian conservative Government. As to how this all pans out Socially, politically and economically, is anybody’s guess. Plus when the gates start to open, atthe end of the of all this , will the Laws go into overdrive or will everyone be so grateful that they are actually selling something they will forego market forces ?
Footnote: I said things are changing very fast and within the last 24 hours The Sunday Times have said that Tesco has but prices up on a number of products. This isnt quite as clear as that as they have said in the main they have removed Mutli Buys to avoid ‘over buying’. At this stage I have some sympathy with that rational as I don’t beleive Tesco would be stupid enough to take advantage of the current situation . Here is another statistic that has been banded about. Approximately 25% of the nation’s calorific intake comes from restaurants, Cafes , fast food joints and take aways. The vast majority of this intake is now being transferred into the supermarkets. It takes time and money to re-adjust to this shift . Consequently it is not just a spike in Demand it is also a shift of the pattern within that demand.