The Covid-19 pandemic has inevitably impacted the lives of humanity and has put a lot of Americans and global citizens in uncompromising financial situations. As the Covid-19 (also known as the coronavirus) continued to spread, this catalyzed to sentiments of anxiety, panic, acrimoniousness and uncertainty for a lot of Americans which lead to altercations in stores due to the shortages of hand sanitizer, toilet paper, disinfectants, etc. Based on the laws of supply and demand, the exponential demand for the aforementioned products mainly, hand sanitizer lead to the increasement of prices by some retailers and the selling out of the hand sanitizers because of individuals and companies purchasing in bulk in order to re-sell. Lastly, there were common consumers who just rushed in droves just to purchase hand sanitizer for themselves and their families. The strong demand for hand sanitizers caused so much volatility in the economy that retailers began charging up to $80 for 40 ounces of hand sanitizer. Governor Cuomo announced that in New York state, the state government will crack down on retailers and punish them with fines and possible incarceration for “price gouging” in the midst of the coronavirus. New York City has already issued 550 violations equaling $275,000 for the rise of pricing of face masks, disinfectant wipes and hand sanitizer. In the state of New Jersey, 80 stores have been warned to “stop price gouging” or get faced with $10,000 in fines.
THE NEGATIVE NET EFFECTS OF PRICE CONTROL IN HISTORY
Based on the laws of economics and price controls, whenever the government intervenes into the free market and manipulates pricing for the sake of affordability, this leads to a shortage of products which deprives a large number of consumers from obtaining the requested goods or services. There are numerous examples of price controls and its disastrous results like the famine in France in 1793 due to the shortage of bread, rent control in Egypt which lead to distressed and dilapidated buildings with generational tenancies mandated by the Egyptian government and due to the lack of incentive to renovate because landlords couldn’t afford to. Additionally, in San Francisco in 2001, ¾ of rent controlled buildings were more than 50 years old and in in England and Wales, privately-built rental housing decreased from 61% of all housing in 1947 to just 14% in 1977. Another example of price control that I will elucidate on is the gasoline shortage during the 1970s when the Organization of Petroleum Exporting Countries (O.P.E.C.) imposed an oil embargo which lead to a decreased output of oil to the United States which lead to a shortage of another commodity which is time. In this case, filing stations in September, 1978 was open for 110 hours a week on average and during the shortage, the hours were decreased to 27 hours a week in June of 1979! There are other examples of price controls specifically pertaining to shortages but to extrapolate a point from these examples, price controls alleviates the incentive for the producer or retailer to please the consumer since their business is compromised due to government manipulating their prices.
THE NEGATIVE NET EFFECTS OF PRICE CONTROL IN THIS AGE OF THE CORONAVIRUS & WHAT SHOULD GET DONE.
As it relates to the Covid-19, since retailers aren’t allowed to “price-gouge”, this had to lead to immense shortages of hand sanitizers especially throughout the Northeast region of the tri-state area (New Jersey, New York and Connecticut). I personally went to 5 different pharmacies including a Wal-Mart yesterday and they all stated that hand sanitizer hasn’t been available in their inventory in the past week. In this case, governmental manipulation of prices of hand sanitizer has not benefited the masses since there is a lack of availability of these products in the midst of a globally alarming pandemic and according to the supply chain of the production of goods, as the demand increases more a finished product, the price of the supply increases as well according to the laws of supply and demand and price elasticities. In this case, the only dictator of prices should be the “invisible hand” also known as the laws of supply & demand. The Law of Supply denotes; the observation that when the price of a good goes up, the quantity supplied goes up. Additionally, The Law of Demand denotes; the observation that when the price of a good goes up, people will buy less of that good. In this case, the price of a product is dictated by the consumer meaning that if hand sanitizer is worth $80.00 hypothetically, this will get legitimized by consumers patronizing or supporting the retailer who’s selling sanitizer for that price point. Additionally, if the $80.00 price is too high, then the retailer would either have to lower the price for the sake of profitability or economically sustainability or their business will suffer due to the lack of purchases because of the “price gouging” or the high price point. Also, if Retailer A wants to charge $80.00 for hand sanitizer, this would create an opportunity for competitors to charge lower prices for the consumer and in this case, instead of the imposition of fines, Retailer A would suffer from consumers supporting Retailers B, C and D because of their competitively lower prices. Not to mention, this would create opportunities for manufacturers to produce an abundance amount of hand sanitizers to distribute to multiple number of retailers or directly to consumers depending on the company’s business model.
In closing, it seems live Covid-19 has caused the vulnerability of a lot of Americans and global citizens’ utilization of rational thinking. Also, what we as a global society need to understand is that whether it’s the coronavirus, the swine flu, the bird flu, Ebola or any pandemic, we need to understand that the laws of free market economics still prevail and if we are going to contain this virus, then we need to keep this in mind.
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