Supply, Demand and Post-Covid Crisis Anomalies

For some of us that aren’t economists the inflation and supply shortages immediately following the Covid 19 national crisis present some interesting points to consider. House painting products at some places are in short supply. A particular base paint for dark colors, base 1, is unavailable in Alaska and at Home Depot for the time being.

 I would think the reason for short supply is the earlier stoppage of production during Covid 19. Many workers were furloughed and stayed home. Builders stopped building by order of law. Then after the introduction of vaccines and eventual renormalize of the workforce the return to work brought an increased demand for painting new homes and repaints to overcome the backlog of demand. The resumption of supply production of paint and paint materials, tools etc at the normal full production (1x) pace were inadequate for meeting increased 2x demand, so inflation resulted with short supply.  And that is the interesting point to consider.

Supply and demand relationships in a global on-demand supply culture may necessarily produce inflation when there are anomalous hiccups like pandemics or sudden war in an economy. A fine-tuned production capacity for meeting supply may not be able to scale up production for what is regarded as a temporary surge of demand.

Producers may be content to sell the same 1x product for inflated prices and not invest in new production capacity that might become a financial loss after demand is met and decreases. There may be little reason to increase from 1x to 1.5x or 2x temporarily if the cost is substantial to increase temporary production capacity.

Supply and demand in the market would bring one to speculate that new producers would enter the market to make products at inflated prices for the 2x demand. New paint producers though, would need to anticipate that the increased demand is temporary and their entire investment in production might be at risk for loss when demand returns to normal at 1x. If new pant producers remain in the market when the demand returns to 1x the surfeit of producers of paint and products may deflate prices per unit to 3/4sx, or too many producers would share a limited demand by reducing production to 3/4sof normal.

 I have no idea when the production of base 1 paint for dark colors will resume. I think it may be somewhat late for this painting season in Southeast Alaska where it is usually a rainforest with 80 inches of rain or more annually. Personally I would hate to start painting a house after the middle of August because September can have lots of rain in some years. In fact the historical average for September is for twenty-seven cloudy or partly cloudy days. Maybe the Delta force can find paint around the world and deliver it to Alaska painters down fast ropes from black helicopters in the night. Home Depot should deliver to post office boxes in Alaska if people check a box for a deposit for return postage if undeliverable to the buyer. Perhaps the HIMAD missile systems sent to Ukraine to blast Snake Island could be adapted for delivering paint across the nation from SR-71 same-day paint delivery supplied tactical paint bases. The economics of the era demand good economic management from those tarnished Ivory Towers in D.C. and the East Coast sadly in need of paint. It seems challenging for politicians and something that interest rate adjustment upward won’t fix directly. Maybe the government should release a weakly economic theory report to let the public know what they think about the entire post Covid 19 crisis renormalization program.

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