Question

After reading the analysis of your peers, reply to at least to 1 peer by providing a theoretical proof (using your textbook and/or materials posted in Canvas) that would either (1) further cement their argument or (2) negate their argument.

During the COVID-19 Pandemic we saw drastic swings in supply and demand for many of life’s essentials.

One area where we saw a huge dip in prices is gasoline. Many folks were only leaving the house for their essential needs, due to the stay at home order issued. School closures and companies adjusting to the new normal of working from home meant less commutes and less usage of gas and oil. This created a surplus gasoline and a shift in demand curve to the left. This created a decrease in demand for gasoline.

Also, since many people were out of work, they gasoline almost because a luxury because paying rent/mortgage and feeding their families became priority, so the excess spending on gasoline was put on hold.

Additionally, an indirect result of the pandemic and stay at home order was that people were finding alternate ways to get around town, biking, walking, etc., instead of taking their car places in order to conserve fuel

Answer 1

The argument is correctly stated.

With the outbreak of COVID-19 and countries imposing lockdown, people were mostly at home and their travel to office stopped completely (with most of them working from home).

Also, those who lost their jobs due to the pandemic could not afford going out in cars

This led to reduced demand for gasoline for vehicles, shifting the demand curve of gasoline to the left

This can be seen as below:

As one can see, with a fall in demand for gasoline, both price and quantity of gasoline in the economy fell drastically.

This explains the massive fall in gas prices around the world during the pandemic.

answered by: anonymous