Question

Thoroughly discuss each of the questions/statements below:

Prices (fuel, water, grocery items, etc.) tend to rise in response to a natural disaster.

1.   Using the term Demand as a topic, explain how/why this occurs.

2.   Using the term Supply as a topic, explain how/why this occurs.

3.   Using the term Equilibrium as a topic, explain how/why this occurs.

4. From an ETHICAL/MORAL point of view, what are the issues involved with this case?

Answer 1

1. Using the term Demand as a topic, explaining how/why this occurs.

When there is a natural disaster, the demand for the products would increase than before because of shortage of goods and with the increase in demand from DD to D1D1 as in the diagram shown below and the supply remaining constant, the equilibrium price will increase increase than before from P to P1 and the equilibrium quantity will also increase than before from Q to Q1.

2. Using the term Supply as a topic, explaining how/why this occurs.

When there is a natural disaster, the supply for the products would decrease than before because of shortage of goods and with the decrease in demand from SS to S1S1 as in the diagram shown below and the demand remaining constant, the equilibrium price will increase increase than before from P to P1 and the equilibrium quantity will decrease than before from Q to Q1.

3. Using the term Equilibrium as a topic, explaining how/why this occurs.

When there is a natural disaster, the demand for the products would increase from DD to D1D1 and the supply of the product would decrease from SS to S1S1 and hence the equilibrium price will increase increase than before from P to P1 and the equilibrium quantity will also decrease than before from Q to Q1.

4. From an ETHICAL/MORAL point of view, the issues that are involved with this case are (1) The price for the products increases and (2) The quantity for the products decreases which means that in times of need, people cannot get the product a lower price and in a larger quantity than before but instead they have to suffer and pay a higher price for a product and also get a lower quantity of that good.