ECO 605 Discussion 4.1: Changing Demand, Supply, and Equilibrium

A medication I will be analyzing for this discussion is Robitussin or Dextromethorphan. Walking into Walgreens the other day I found every cold/flu medication out of stock due to its popular demand, and I found it perfect for this discussion. Four factors that can shift a selection’s demand include substitutes, income, taste, and expectations (Hicks, 2021).

The factors of demand were initially discussed early on in the class but pertain to this week’s content. If consumers are able to afford this medication and are in need of this medication, they will be more likely to purchase Dextromethorphan. Income is a very important factor, however, taste and expectations are also major considerations when determining a selection’s demand. With the increase in COVID-19 and flu cases, the taste and expectations of this medication have shifted the demand for this good. Consumers have taken an interest in Dextromethorphan (along with other cold/flu medication) to help relieve their symptoms. If there was not a pandemic causing cold/flu symptoms, consumers would not have the taste for this good. With that being said, a person’s expectations also shift the demand. If consumers expect their symptoms to decrease when taking Dextromethorphan, it will shift the demand curve because there will be an increase in the quantity demanded. If they find that these medications do not help manage their symptoms, they may choose alternatives to manage illness. Some may opt-out and consider substitutes such as tea, soup, vitamins, and fluids. As a consumer, I have found substitutes becoming more in demand due to the fact that medication has been harder to find in stores, making people have no choice but to choose the alternatives.

When it comes to supply, there are two situations that can occur that result in a shift in supply. When supply increases, it results in a decrease in equilibrium price and an increase in equilibrium quantity (Hicks, 2021). On the other hand, when supply decreases, we move up the demand curve and there is an increase in equilibrium price and a decrease in equilibrium quantity (Hicks, 2021). Two examples that shift supply includes a change in resource prices and a change in input combinations by existing suppliers (Hicks, 2021). For example, if there is an increase in rent or labor costs for the companies distributing and packaging this medication, it will result in an increase in costs and a decrease in supply. If there are more companies packaging and distributing this Dextromethorphan, it will result in an increase in the supply and a decrease in price. As a result, we will not see as many stores sold out of this medication. In contrast, if there are is a decrease in the number of suppliers, it will result in a decrease in supply, which will decrease the opportunity of people being able to purchase this supply. In today’s world, I believe that we are seeing a decrease in supply. Short staffing and a halt in the supply chain have impacted the ability of companies to supply this medication to pharmacies at a steady rate. For that reason, we are seeing a spike in prices. People are in dire need of Robittusin and other cough/flu medication, therefore, we see the issue of empty shelves and increased prices. Demand and supply may be two independent topics, yet, they go hand in hand and impact the healthcare industry and how consumers can access goods such as over-the-counter medications.

References

Hicks, L. L (2021). Economics of Healthcare and Medical Care. (7th ed). Jones & Bartlett Learning.

Discussion Guidelines

Initial Post

1. Provide an example of a medical treatment, device, or drug.
2. Give four examples of factors that will shift your selection’s demand.
3. Provide two examples of factors that will shift your selection’s supply.

Response Post(s)

Respond to at least one of your peers by providing an example of a change in demand or supply of their product that will affect the selection’s equilibrium price (P_e) or equilibrium quantity (Q_e) for their product. Explain how this change in demand or supply will impact the P_e or Q_e.

Submission

Post your initial and follow up responses and review full grading criteria on the page.