Real World Economics: COVID evokes economic lessons – St. Paul Pioneer Press

by | Jul 3, 2022 | Financial

If you understand a few principles of economics, you can see such principles playing out in your personal life every day. I’ve said that to micro econ classes for 40 years. And it certainly was true over the last two weeks as we contracted and recovered from COVID-19. Edward Lotterman
A simple such principle is “demand shifts.” Demand is a price-quantity relationship — how many units of something will consumers buy at each of a wide range of prices? At any point in time, if producers raise prices, they will sell fewer and if they lower prices they will sell more.
A “shift in demand” principle is different. It notes that as relevant circumstances change, consumers will buy larger or smaller quantities than before at each of the same range of prices. A producer can keep prices fixed, but will sell more units if demand “shifts to the right” and fewer if it “shifts to the left.” The words “shift,” “right” and left” refer to movements on the supply-demand diagram force-fed to every econ student.
In the real world, COVID shifted demand for masks to the right — people wanted to buy many more masks at each possible price. Over time, supply also shifted to the right, as production ramped up in response to demand. But for months at the start of the pandemic, we were in an apparently …

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