Answer to Question #236193 in Economics for Genine Kriegler

Question

The fear of nationwide lockdowns due to the current pandemic has pushed many consumers into “panic buying”.

1.Critically evaluate this statement and use demand and supply analysis to analyze the possible impact of panic buying on market prices.

2 Substantiate the type of income elasticity most applicable during this time.(ESSAY)

Answer 1

1. Two ways of thinking. We have two levels of decision-making. At a basic level, individual decisions are best understood as the interaction between the logical and emotional brains. The two systems use different operations. The logical brain calculates and considers the evidence. The emotional brain is intuitive, fast, mostly automated, and not very comprehensible. The logical mind tells us, "No, I don't need to buy another roll of toilet paper." But the emotional brain says, "Well, it's better to play it safe than sorry." Our emotional mind is very much adapted to visual imagery, and we have seen graphic images of people on social media and the news wearing masks and so on.

2. Anticipatory concern. People have anxiety about anticipation. Anticipation anxiety is the fear and horror that you experience before an event. For example, when you have been fearful for weeks about the outcome of a doctor's visit or preparing for an interview. As we saw with the coronavirus pandemic, fear arises long before the actual infection.

3. Fear is contagious. Like a virus, fear tends to spread from person to person. This can happen even if there was no rational basis for the fear, to begin with. As a result, a group of people unknown to each other can spontaneously come to emotional unity. When buying anxiously, people feel, "If they do it, I'm better off too."

4. Herd mentality. The herd mentality is another reason for panic buying. As social beings, we interpret the danger of a situation based on the reactions of other people. When the herd instinct kicks in, people put off judgment and start doing what everyone else is doing. So, if everyone else buys food in a panic, people follow the flock.

5. Intolerance of uncertainty. Uncertainty intolerance can be defined as the inability to accept the possibility that a negative outcome may occur in the future, regardless of the likelihood of its occurrence. What makes the coronavirus especially frustrating for some people is that much is unknown about it - when and where it might occur, or how intense it will be. In particular, people with pre-existing anxiety disorders tend to be intolerant of uncertainty or worry a lot about small things. They constantly check news sources and are intimidated by the images they see.

6. A sense of control. Also uncontrollability matters to uncertainty. People want to find a way to keep the situation under control. The nature of this virus is such that the result remains unchanged regardless of any action a person might take. Control can be thought of as believing that you have a reaction at your disposal that can influence the outcome. And that could have contributed to some crazy shopping. Anxiety shopping helps people feel in control of the situation.

7. Misinformation and rumors. The late psychologist Stuart Henderson Britt once remarked, “One person says there might be a problem. The next person says there is probably a problem. The next person says there is a problem. " We are more vulnerable than ever to the spread of misinformation, especially in the midst of a crisis. In an era of interconnectedness, disinformation spread by the public on social media instantly reaches millions of people around the world. For example, in Tokyo, false information on social media about paper shortages due to the coronavirus in China led to panic buying of toilet paper. The government has assured the population that they have sufficient supplies and that almost all of the toilet paper is produced domestically.