A shortage, in economic terms, is a condition where the quantity demanded is greater than the quantity supplied at the market price. There are three main causes of shortage—increase in demand, decrease in supply, and government intervention. Shortage should not be confused with "scarcity."Please have this in mind before I do my analysis concerning the exorbitant prices of goods and services in this Covid-19 pandemic era.
Demand and Supply analysis in Economics is like identical twins. Any time demand exceeds supply the price of the commodity in question rises automatically. Before we proceed on the analysis of demand and supply, let's take note of the different markets we have here in Ghana.
- Centrally planned/ Control Market or State-owned market ( socialist)
- Capitalist or free market and lastly
- Mixed Market.
In Ghana, we are practising mixed Market or economy. Thus there is an element of State and private ownership.
NB:. You can read on each of the market economy stated above.
In capitalist economy, their basic objective is to make profit at all cost when they have the means. Here, what happens is that, the forces of demand and Supply interplay determine the price of the commodity in question. No government intervention. So when demand exceeds supply,the price shoots up. When it happens like this, it leads to so many things such as Black marketing ( it does not mean the market is black ooo) it means producers will be selling at a higher price rather than the stipulated price, hoarding of goods ( thus people will be having the goods but they will be keeping them to be sold at a higher or a more higher price in the future), first come first serve approach will be adopted as well ( preferential treatment).
So as producers are hoarding the goods,the prices will keep on increasing at an increasing rate. In fact, astronomically. You might buy or purchase something at a price,let say ¢2 and the next moment you want to buy the same good or product the price will be like ¢ 10.
In the face of all these things, there is a mechanism in place we call, price control thus we have minimum and maximum price control or legislation. Taxes can also increase the price of the goods. So government have to come in by giving out tax waivers to the producers. When this happens, the prices of the goods will reduce or fall to pave way for ordinary consumers to be able to buy the goods in question. Incidence of taxation also play a vital role when government want to give tax waivers to producers. Incidence of taxation is the final resting place of a tax. Thus who pay more of the price, the producers or the consumers or both. Here too, we have to take into consideration, the elasticity of demand (the degree of responsiveness). NB: Tax is a compulsory payment made by producers and other workers to the government. And taxation is one of the major source of government revenue.
Please read on the price control.
We need to know the type of goods as well, we have normal goods, inferior goods, goods of ostentation or Giffen goods. All these need to be looked at before determining the price.
Issues with the capitalism is that, with the slightest chances they have,they want to make profit by all means by increasing the price unnecessarily.
NB: To my producers, the prices are too much. Much could be done referring to quantity other than a state or condition.The abnormal profits you have made so far is enough. Let's be each other's keeper.
In this Covid-19 pandemic era, you and I will appreciate Economics in its fullest.
But this too shall pass...
Together we shall overcome this Covid-19 pandemic.
Credit: Francis Pious Egoeh.