Answer to Question #312230 in Economics of Enterprise for Nompumelelo

Question

Use demand and supply analysis to analyse the possible impact of panic buying on market prices

Answer 1

Panic buying is when the purchase volume rapidly increases, causing a high demand for goods in the market. Consumers may be afraid of rapid inflation that may lower the money value and increase the prices of products, thus purchasing products in large volume. Punic buying may have different impacts on demand and supply. The demand for products will be higher than the supply, and prices will increase, leading to inflation because the need is higher than the supply. However, the suppliers will produce the products in high volumes because they are willing to sell more when the prices are high to maximize profit. The products supplied will increase in the market, and the prices will eventually decrease because supply will be more than demand.