The Covid-19 pandemic has caused adverse effects on household economies. Many people lost jobs, and businesses have since scaled-down production, went to recess, or even closed down in the recent past. This has reduced the household purchasing power to cater to their daily needs. The increased supply of services and goods has not changed the demand. Though prices have gone down, people have resorted to buying only what is necessary within their budget limits. Many people lost their source of livelihood. Families have been struggling to provide for their needs with meager pay. Covid-19 has and continues to claim lives, especially the elderly and people with other medical complications. These are the people who form a microeconomic power to influence markets and prices too. Their death reduces projected demand by firms to produce goods and services. This may be worse if they are the breadwinners of the families. This created a big gap in the supply chain, causing a surplus exceeding the customer base, opening the way for an imperfect market that leads to price fluctuations. Businesses on the receiving end suffered losses due to the high cost of production or goods being unable to enter the market that is already strained.
In response to the pandemic, firms have resorted to reducing production costs, including laying off workers, cutting down other production lines, and supplying only what the household economic power can reach. Some companies decided to engage workers in shifts and pay them half their salary to cushion them from losing the whole pay. Others facilitated workers to work from their homes, but this cannot fully deal with the effects because certain lines of trade need physical interaction with the customers. Anticipated profitability cannot be realized since most firms are operating below the production capacity in fear of a reduced market due to household incapability to purchase even if price ceilings go down to rock bottom (Borgards et al., 2021). For example, Safaricom (K), after realizing this, through its corporate responsibility, subsidized its services and goods to more affordable levels, which forced its competitors to follow suit or otherwise lose their customers (Business Daily 2020). This shot down profitability that some workers lost jobs, and other affiliated stakeholders suffered too.
The supply chain during the pandemic has been unpredictable following fluctuating market prices. Firms had problems in deciding how much to produce and at what prices to sell because people’s power to purchase was growing weaker every day. It forced some companies to scale down production or go on recess to line up with the weak demand in the market. This decision came to protect firms from incurring most costs that may not be fruitful in the long run. For instance, during this period, textile industries were affected since people directed their focus on necessities only. Buying new clothes stopped being a priority because old clothes can still serve the purpose. To the manufacturer, it is a hard time and uneconomical venture to produce new products without the market to sell.
The hotel industry was the most affected when hotels were directed to close down to comparting Covid-19. Families that depended on hotels and related services went out of business and remained with nothing to sustain them during the period. This deprived them of a source of livelihood and the purchasing power required to sustain other businesses. It affected their demand for services and commodities that were already in the market, causing a surplus that affected market prices downwards.
After realizing the gravity of the pandemic, governments, through their regulatory agencies, gave subsidies on the production of commodities that form necessities. This regulated pricing of essential products and services to be afforded to all. Negotiations between governments and companies also played a great role in the pricing of these essential products. Boardroom agreements were made to reduce prices for sustained economies. Other measures included reducing VAT on certain commodities and services to cushion both the consumer and the firms from adverse effects of Covid-19. All these were done to regulate the pricing of commodities in the already fragile market that the natural economic regulators were failing to remedy.
In conclusion, Covid-19 has caused an economic crisis that has never been witnessed in the recent past. It ran across all sectors in the world, causing devastating problems that remain to be remembered for years to come. Given this study, we have looked at the pandemic effects of household and commodity pricing. The business community suffered a great deal to the extent that the major corporates registered huge losses as a result. The self-regulatory business system failed to deliver the required results due to the complexity of the problems in the market. It took governments and all stakeholders to intervene because the supply and demand relationship could not determine to price anymore (Zaremba et al., 2021). Pricing is key in doing business. The profitability of any company depends whole on the pricing of the commodities. The world should learn from this pandemic and devise strategies to control pricing to avoid catastrophes in the business world in the future.
References
Borgards, O., Czudaj, R. L., & Van Hoang, T. H. (2021). Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact. Resources Policy, 71, 101966.
Business Daily (2020). Web.
Zaremba, A., Kizys, R., & Aharon, D. Y. (2021). Volatility in international sovereign bond markets: the role of government policy responses to the COVID-19 pandemic. Finance Research Letters, 102011.