What is happening to demand?
Health experts tell us that our best defense against the coronavirus is clean hands. So, consumer preferences for hand sanitizer are changing and the demand for hand sanitizer is increasing.
What is the effect?
When the demand for hand sanitizer increases, the quantity demanded exceeds the quantity supplied and a shortage arises at the original price. The price rises until the shortage is eliminated.
Why are distilleries getting involved?
Hand sanitizer is made from alcohol, but so are vodka, gin, and whiskey, so hand sanitizer and spirits are substitutes in production. When the price of hand sanitizer rises, distilleries shift production from spirits to hand sanitizer. The quantity of hand sanitizer supplied increases.
Let’s look at a graph of the hand sanitizer market.
Now take a short quiz to check that you understand what you just read.
Multiple Choice Test – COVID-19 and Hand Sanitizer