Effects of changes in market
In economics, businesses produce goods and services with the main aim of making profits. The prices of goods and services in the economy depend on the nature of the market in which transactions take place. In a free market with minimal government intervention, the prices of goods and services are determined by the forces of demand and supply. A specific product price is determined by the equilibrium between its demand and its availability in the market. Many factors affect demand and supply therefore prices of goods and services in the economy keep on changing with changes in the market conditions.
In analyzing the effects of changes in market conditions on the prices of goods and service, I will discuss the fast-food market. The prices of food and drinks keep on changing with changes in the market conditions. A global pandemic of Coronavirus has hurt the fast-food market. The market conditions have changed as a result of the pandemic with the government issuing directives of a lockdown preventing fast food businesses to operate normally. Customers cannot visit the restaurants making these businesses to operate at a lower scale.
Fast food businesses have started producing less food and drinks as a result of the pandemic. They are currently only operating on home deliveries for their customers. The customers have also been affected by the pandemic. The level of employment in the economy has declined with many people losing their jobs. Consequently, the purchasing power of the consumer has reduced leading to a reduction in the level of consumption in the economy. Consumers have been forced into lesser spending due to a reduction in their real income.
The pandemic has seen the government issuing orders of locking people down in their houses. Movements in the economy have reduced leading to a reduction in the level of economic activities in the market. The fast-food market is highly competitive with many established multinational companies such as the McDonalds company. Big restaurants have been severely hurt due to lack of movements in the economy leading to a reduction in the quantity of production of food and drinks. These companies have since recorded a decrease in both sales and profit levels.
Locking down people couple with the loss of job opportunities for consumers has resulted in consumers preferring to cook their food from their homes. They hardly order for home delivery from these fast food companies. With the tension being high, consumers have a lack of confidence for fast food fearing for health complications. The demand for food and drinks has significantly reduced. Fast food businesses have resorted to survival with many companies unable to meet the daily cost. These companies have been forced to retrench some of their workers in a bid to reduce operating cost.
The pandemic has also seen many people lose their lives. The general population has significantly reduced with thousands dying every day. Consequently, the production level in the economy has declined due to a decrease in demand. A consumer demand reduction has forced these companies to reduce the quantity of supply in the market. The prices of fast foods and drinks have also been affected due to the global pandemic. A reduction in demand has forced the managements of these fast food companies to reduce the prices of fast food and drinks in a bid to attract consumers into making purchases.
The government policies also affect the market conditions and consequently prices of goods and services in the economy. When the economy is facing a recession such as today amid a global pandemic, the government will lower the taxes levied on businesses in a bid to save them from going down. Fast food companies have been given incentives by the government to help them meet daily operational costs. The overall cost of production of foods and drinks has significantly reduced helping them make some profits.
The overall effect of the Coronavirus pandemic on the fast-food market is a negative shift in both the demand and supply of foods and drinks. The supply has reduced as a result of a decrease in demand with the cost of production per unit increasing. Despite the efforts of the government to save fast food companies, the combined operational cost and the target profit of the management of the company makes it impossible to achieve the goals and objectives of the business. The overall effect is a negative shift in the supply curve.
Coronavirus global pandemic has negatively impacted business operations with many small and medium fast food businesses finding it hard to survive. The bigger fast food companies such as McDonald’s have reported a significant reduction in both sales and profits. The prices of food and drinks keep on changing with a lot of uncertainty brought in the economy by the pandemic. The level of production in the economy has also reduced by a considerable margin. It has resulted in poor profits and losses for fast food companies across the economy.
In conclusion, the economy has been severely hurt by the pandemic. Many industries have had a significant reduction in the level of production. Changes in market conditions harm the prices of goods and services in the economy. The demand and supply levels of the economy in the free-market usually determines the prevailing prices. The government has played a significant role in helping small and medium fast food businesses meet the increasing operating cost at this difficult period of a global pandemic. The economy has been temporarily been put in a recession with the economic activities reducing at an alarming rate. However, there is hope for a future recovery for the fast-food industry with the pandemic soon to be over. Everything will go back to its place and the economy will once again flourish.