Thread by @NaijaFlyingDr

I find it so interesting when I see classic economic principles operating in healthcare markets.

The law of demand and supply has been demonstrated beautifully in the market for ventilators will explain in this thread

The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource.

The theory defines what effect the relationship between the availability of a particular product and the desire (or demand) for that product has on its price.

A ventilator is a device that helps people breathe.

The Coronavirus is a 'lung eater'. It decreases the ability of the lungs to get oxygen into the blood. When the virus stops the lungs from working properly, ventilators take over some of that work.

This prevents people from dying as the lungs stop working.

Therefore the demand for ventilators has skyrocketed, as coronavirus patients get admitted to hospital and thier lungs stop working.

The law of demand says that at higher prices, buyers will demand less of an economic good.
The law of supply says that at higher prices, sellers will supply more of an economic good.

These two laws interact to determine the actual market prices and volume of goods that are traded on a market.

The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good.

Unlike the demand relationship, however, the supply relationship is a factor of time. Time is important to supply because suppliers must, but cannot always, react quickly to a change in demand or price.

The covid 19 pandemic has induced a massive shift in the demand for ventilators as countries all over the world struggle to buy.

This has driven prices up

When prices go up, according to the law of supply, more people start producing ventilators because its a hot market. When prices increase, supply increases, this is the law of supply

However, ventilators are difficult to produce. They require high safety standards, regulation and certification.

Their manufacture also requires access to a complex global supply chain which is under strain due to the social distancing/work from home rules resulting from the pandemic.

Hence its more difficult for the law of demand and supply to kick in because there are far fewer ventilators available and massive demand which is increasing by the hour.

This is whats called a shortage; a situation where the quantity demanded at a particular price exceeds the quantity that sellers are willing to supply.

This places upward pressure on prices.

Whenever resources are particularly scarce, demand exceeds supply and prices are driven up. The effect of such a price rise is to discourage demand, conserve resources, and spread out their use over time.

The greater the scarcity, the higher the price and the more the resource is rationed.