Commuters in Mexico, where the crowd is wearing face mask in the prevention of swine flu.
The most common type of surgical mask.
Firstly, the definition of demand is the desire to own anything, the
ability and willingness to pay for it whereas a shortage or an excess
demand happens when consumers are willing to buy more than producers are
willing to sell. From here, the market effect of growing demand for surgical
masks is due the H1N1 virus that leads the public to become aware of being
hygienic. As all people are concerned and want to protect themselves from this
pandemic, the demand for it has dramatically increased before the supply of it
can be increased. Therefore, this rapid
increase of demand with unchanged supply has theoretically shifted the demand
curve to the right and thus increasing the equilibrium price of it.
(photo from mbaecon.wikispaces.com)
Demand curve shifts from D1 to D2 due to higher demand, while supply curve is assumed to remain the same as the increase of demand is too rapid that supply can't be increased at the moment. Therefore, it brings to a higher market equilibrium price.
However, the demand for the masks
has increased so greatly that the government had to set the price below its
equilibrium as to protect the consumers of low financial ability when
purchasing surgical masks. Price ceiling is a government-imposed regulation
that makes it illegal to charger a price higher than a specific price. The
government decided to impose such price ceiling as producers are still found to
receive fair profit after the study on production cost of masks. Under the Price
Control and Anti-Profiteering Act 2010, errant traders or suppliers who
overcharged might get a fine of up to RM15,000 or a maximum of two years’ jail
or both upon conviction. A price ceiling is imposed due to the reason that the surgical
masks should be financially affordable to everyone, and it is also to prevent
the citizens to be taken advantage of by the traders as many have been selling
a mask at cost of 30 cents at RM5 or above, which is 16.7% higher than its
cost.
As a result of the price ceiling imposed, where the price is set
below the market equilibrium, a permanent shortage occurs. This is according to
the law of demand that when a price falls, the quantity demanded rises. It is
obvious that there would be a shortage of the masks since before price ceiling
was introduced; the masks are already excessively demanded. The demand of the
public for the masks has then reduced as news about lesser cases of H1N1 is
reported.
Students are given free face masks. Some schools have to be closed temporarily due to the spread of the H1N1 virus among the students.
In my opinion, the imposition of price ceiling on surgical masks
that functions to control the price is definitely a good idea to enable that
everyone can purchase them. However, the price ceiling imposed is only
protecting the privilege of the consumers to not buy masks at such expensive
price compared to its cost. It doesn’t help to solve excess demand as it can
only be solved by increasing its selling price according to the law of demand.
Therefore, to really get rid of the shortage of masks, an increase in the
supply of it will be more effective. There goes this saying of the Malay
proverb “prepare the umbrella before it rains”, everyone should be vigilant to
the changes of health-related issues so that prevention can be done. Well, more
surgical masks can be prepared for selling if we have discovered such need due
to the pandemic earlier, right?
Reference:
Prepared by: Loh Khei Ying
Student ID: 0311978
Playtech launches new poker room at Isle of Capri - DRMcd
ReplyDeleteCasino operator Playtech has launched 광양 출장샵 a new poker room 강원도 출장마사지 at Isle of 안양 출장안마 Capri in the Isle of Capri, owned by a 부천 출장샵 Malta-based 세종특별자치 출장안마 casino operator,