“The Law of Supply and Demand Isn’t Fair”

For the Writing Assignment, you need to read the article “The Law of Supply and Demand Isn’t Fair” by Richard
Thaler, published on May 20, 2020 by The New York Times. You can view it online at
https://www.nytimes.com/2020/05/20/business/supply-and-demand-isnt-fair.html (Links to an external site.).
It is also available on Canvas.
The article illustrates a number of economic concepts that we have discussed in class. You should write a short
narrative essay that analyzes the article using the tools developed in class. Below is a guideline on how the
essay should be structured:
Use the first one or two paragraph(s) to introduce your essay, say what you are going to discuss, and reference
and summarize the article.
The article discusses the prices of a few essential goods during the COVID-19 outbreak. In the next paragraph
of your essay, discuss how COVID-19 outbreak affects the market supply and demand of essential goods such
as hand sanitizers and masks. Address the following points and provide an analysis:
Why does the market supply and demand of these goods change during the outbreak? Explain the contributing
factors clearly.
Using a S-D graph, show the effects of these factors on the supply curve and demand curve.
According to the law of supply and demand, what should have happened to equilibrium price and quantity of
the goods? Show the effects on your S-D graph and provide an explanation.
Should there be any shortage or surplus of these goods according to the law of supply and demand?
According to the article, the prices of some essential goods did not change in the same way as predicted by
the law of supply and demand. In a passage, the article reads: “Fairness norms help explain the breakdown of
supply chains of medical equipment in the coronavirus crisis.… When the need for the masks surged, these
suppliers were not allowed to raise the price, even if inclined to do so.” Addressing the following points and
provide an analysis in the next paragraph(s) of your essay:
Using another S-D graph, show what happens to the price and quantity of the goods when the society
practices fairness norm pricing.
In your graph, illustrate why consumers might have a difficult time finding essential goods in this case.
In your graph, find the areas that represent the sizes of consumer surplus and producer surplus under fairness
norm pricing. How does fairness norm pricing affect consumer and producer surplus in the markets for
essential goods? Explain.
Evaluate the pros and cons of fairness norm pricing. In particular, address the following points:
Are the markets more efficient when the goods are priced according to fairness norms or the law of supply and
Who might benefit from fairness norm pricing and who is hurt?
Do you think it is a good idea to apply fairness norm pricing on essential goods during the COVID-19 outbreak?
Conclude your essay in one last paragraph.

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