Friday, May 29, 2020

Supply and demand works even (or especially) during pandemics

The coronavirus pandemic is affecting equilibrium prices in many markets (WSJ, May 2020). Here are two questions raised by the article. 

  1. Why might diners at a restaurant more readily accept a coronavirus surcharge or fee than a simple increase in price?
  2. Why might some retailers keep prices low even when they recognize that their price is below the equilibrium price and a shortage exists?

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