ECO 605 Discussion 4.1: Changing Demand, Supply, and Equilibrium
ECO 605 Discussion 4.1: Changing Demand, Supply, and Equilibrium
The example used will be surgical masks.
Four factors can influence the demand curve; A change in income, the price of related goods, tastes, and expectations. When income increases, the demand for the single use surgical masks would increase. When income decreases, the demand for surgical masks will decrease because buyers will want reusable masks. Another factor that could shift the demand for surgical masks is if there was a massive shipment of them that arrived in an area. If every person had an ample stockpile of surgical masks and there were still many for sale on the market, then the demand for the surgical masks would decrease. The surgical mask prices would be cheaper and fewer buyers would want cloth masks or other related products. If everyone’s stockpile of surgical masks was running low and there were very few for sale on the market, then the demand for the surgical masks would increase. The demand for substitutes like cloth masks would decrease. If a buyer believes they may come in contact with someone who is Covid-19 positive, then they may prefer a surgical mask over a cheaper, less effective substitute. A factor that could increase the demand for surgical masks would be if a new Covid-19 variant was expected. More people will be wanting to purchase surgical masks. A factor that could decrease the demand for surgical masks would be if “herd immunity” was achieved and the spread of Covid-19 was expected to decreased drastically. The demand for surgical masks would decrease because they are no longer needed.
A change in the resource prices will affect the supply of the product. An increase in the resource price will decrease the supply of the product (Hicks, 2021). Majority of the surgical masks that healthcare workers wear are made of a non-woven fabric product. If there was to be a shortage of this non-woven fabric or a decrease of suppliers for this material, the price of the material would increase, resulting in fewer surgical masks produced. There would be a decreased supply of surgical masks. A decrease in capital stock will also decrease the supply (Hicks, 2021). At the factories where surgical masks are made and packaged, if there was a decrease in capital stock, such as workers, then there would be fewer or no surgical masks produced and shipped out. Therefore, the supply of masks would decrease.
Reference
Hicks, L. L. (2021). Economics of Health and Medical Care. Jones & Bartlett Learning.
Several factors can influence market demand for goods. Cervical cancer screenings are a very important part of women’s health. One
factor that has shifted market demand has been the cost of this screening to women without insurance or are who underinsured. This screening can cost upwards of $500. This can be a barrier to the quality care women deserve (Sawaya et al., 2019). Another factor that can prevent women from going to their doctor can be a change to their income, perhaps they lost their job or hours were reduced. With covid, there was a massive shift of women out of the workplace. People tend to put off seemingly routine or unnecessary tests when they can’t afford them. Another factor that influences demand is the increase or decrease in the consumers. The US has an aging population and more women are turning 74 which puts them outside of the recommended age for routine screenings. Expectations can also influence the number of cervical cancer screenings completed. Many women find this to be an unpleasant experience (Sundstrom et al., 2018). Patients often try to avoid unpleasant experiences.
A recent change in the ASCCP guidelines can cause a shift in supply for cervical cancer screenings. These screenings used to be annual, but they moved to every 3 years. This reduction in screenings required reduces the number of screenings that are ordered each year. Factor prices and availability is another factor that can affect supply (Hicks, 2021). If there are fewer tests produced, less with be available to the consumer. With the reduction in workforce, reduced labor, and the rising cost of inputs, there might be fewer tests available in the market (Sawaya et al., 2019). Transportation of the tests to the various medical facilities can also influence supply. The dramatic changes in weather combined with the labor shortage can contribute to the rise in these costs, which can then cause supply problems.
Hicks, L. (2021). Economics of health and medical care. Jones & Bartlett Publishers.
Sawaya, G. F., Sanstead, E., Alarid-Escudero, F., Smith-McCune, K., Gregorich, S. E., Silverberg, M. J., … & Kulasingam, S. (2019). Estimated quality of life and economic outcomes associated with 12 cervical cancer screening strategies: a cost-effectiveness analysis. JAMA internal medicine, 179(7), 867-878.
Sundstrom, B., Brandt, H. M., Gray, L., & Pierce, J. Y. (2018). It’s my time: applying the health belief model to prevent cervical cancer among college-age women. Journal of Communication Management.
An example of a medical device for this assignment is goggles or faceshields. The video presented (Bradley University) shows that these factors will shift the demand curve.
- Change in income – Inferior goods like disposable plastic goggles used in hospitals, goods, or services will decrease when income increases, the demand curve will shift to the left. The demand curve will shift to the right. While normal goods like branded goggles like Stoggles increase when income increases.
- Price of related goods – These have two factors, complement and substitute goods. This entails that as the demand for the other increases or decreases, the other good’s price is changed—branded goggles vs. disposable goggles.
- Tastes or Preference – The intensity of the consumers’ desire for particular goggles.
- Expectations – These are consumers’ beliefs about what will happen in the future, which affect demand behavior in the present. Consumers tend to purchase goggles at present due to the COVID surge.
Two examples of factors that will shift goggles supply are as provided by Bradley University Lesson 4.1:
- Change in resource prices – If there is an increase in resource prices, this will decrease the supply curve. It will shift in or to the left. If the resource prices drop, the supply will increase, causing the supply curve to move to the right.
- A change in input combinations by existing suppliers – If there is an increase in cost, this will cause a decrease in supply. The whole supply curve will shift inward or to the left. Another possibility is that a new input combination will reduce costs. In this case, there will be an increase in supply, meaning the supply curve will shift out or to the right.
Reference:
Bradley University. Analysis of Competitive Markets. [Video]. https://lmscontent.embanet.com/Media/BDU/ECO605/ECO605-w04-m01/index.html
Bradley University. Demands and Its Determinants.[Video]. https://lmscontent.embanet.com/media/BDU/ECO605/ECO605-w01-m01/index.html
A medication I will be analyzing for this discussion is Robitussin or Dextromethorphan. Walking into Walgreens the other day I found every cold/flu medication out of stock due to its popular demand, and I found it perfect for this discussion. Four factors that can shift a selection’s demand include substitutes, income, taste, and expectations (Hicks, 2021).
The factors of demand were initially discussed early on in the class but pertain to this week’s content. If consumers are able to afford this medication and are in need of this medication, they will be more likely to purchase Dextromethorphan. Income is a very important factor, however, taste and expectations are also major considerations when determining a selection’s demand. With the increase in COVID-19 and flu cases, the taste and expectations of this medication have shifted the demand for this good. Consumers have taken an interest in Dextromethorphan (along with other cold/flu medication) to help relieve their symptoms. If there was not a pandemic causing cold/flu symptoms, consumers would not have the taste for this good. With that being said, a person’s expectations also shift the demand. If consumers expect their symptoms to decrease when taking Dextromethorphan, it will shift the demand curve because there will be an increase in the quantity demanded. If they find that these medications do not help manage their symptoms, they may choose alternatives to manage illness. Some may opt-out and consider substitutes such as tea, soup, vitamins, and fluids. As a consumer, I have found substitutes becoming more in demand due to the fact that medication has been harder to find in stores, making people have no choice but to choose the alternatives.
When it comes to supply, there are two situations that can occur that result in a shift in supply. When supply increases, it results in a decrease in equilibrium price and an increase in equilibrium quantity (Hicks, 2021). On the other hand, when supply decreases, we move up the demand curve and there is an increase in equilibrium price and a decrease in equilibrium quantity (Hicks, 2021). Two examples that shift supply includes a change in resource prices and a change in input combinations by existing suppliers (Hicks, 2021). For example, if there is an increase in rent or labor costs for the companies distributing and packaging this medication, it will result in an increase in costs and a decrease in supply. If there are more companies packaging and distributing this Dextromethorphan, it will result in an increase in the supply and a decrease in price. As a result, we will not see as many stores sold out of this medication. In contrast, if there are is a decrease in the number of suppliers, it will result in a decrease in supply, which will decrease the opportunity of people being able to purchase this supply. In today’s world, I believe that we are seeing a decrease in supply. Short staffing and a halt in the supply chain have impacted the ability of companies to supply this medication to pharmacies at a steady rate. For that reason, we are seeing a spike in prices. People are in dire need of Robittusin and other cough/flu medication, therefore, we see the issue of empty shelves and increased prices. Demand and supply may be two independent topics, yet, they go hand in hand and impact the healthcare industry and how consumers can access goods such as over-the-counter medications.
References
Hicks, L. L (2021). Economics of Healthcare and Medical Care. (7th ed). Jones & Bartlett Learning