Before describing and diving deeper into the economic impact of the pandemic on the worldwide demand and supply levels, let’s begin with defining both demand and supply. Demand refers to the request made by consumers on a range of goods & services at a certain price over a period of time. On the other hand, supply refers to the provision of these requested goods by suppliers.
Unfortunately, the virus left a scope of countries, cities, and societies facing detrimental consequences, both socially and economically. However, lets discuss the effect of the pandemic on the economies of various nations, specifically a very important component of each economy – demand and supply.
Let’s begin with supply. COVID-19 led to a massive supply shock – a disruption and reduction of production levels of goods & services due to the sudden closure of businesses and factories all around the world.
Conversely, it is argued by many of the world’s professors that the supply shock was of smaller magnitude than the demand shock. Besides decreasing production levels, the closure of businesses and factories led to a loss of many jobs, consequently resulting in a fall of income received by workers and hence, the levels of consumer spending and consumption within an economy.
All of these adverse impacts of COVID-19 on the demand and supply levels of different economic agents led to a state of turmoil for the different businesses, firms, and economies all around the world.
