Understanding and regulating such economic factors as supply and demand are key aspects that protect any business from bankruptcy. However, owners of small and medium businesses cannot control the general supply and demand system. In this case, governments start to create the most favorable ways to save the economy and make sure that the increasing trend will not go down. The global financial crisis in 2008 became one of the brightest examples of the decreasing rate of supply and demand in the world. On the example of this period, the essay will outline what caused this problem and how to prevent similar situations in the future.
The financial crisis of 2008 is one of the major problems that appeared at the beginning of the twenty-first century. According to Sirui (2021), this crisis was considered one of the most serious problems since the Great Depression before the COVID-19 pandemic happened. The first sign of the crisis was seen in 2007 when some world economists mentioned the decrease in the number of credits. Some experts define this global problem as a subprime mortgage crisis as a significant housing market crash (Gray et al., 2019). The issue first appeared in the USA, and due to the great influence on other countries, the crisis started to spread at a high rate. Many areas of life are tied to housing services, and when the central system shows failure, other spheres are negatively influenced, causing financial problems to the world.
Noticeable changes also appeared in supply and demand as professional economists had to see how changes in both these areas might improve the situation. One of the key factors that affected the supply and demand curve was the decrease in mortgage pricing. To start the generation of money in the economy, many workers in the housing service decrease the price on short – and long–term accommodation contracts. This strategy helped increase the demand for houses in the world (Brem et al., 2020). However, due to the inelasticity of the market, supply went down as many owners of houses wanted to wait for a higher price on their housing suggestions to receive more.
Uncertainty in the current situation made it impossible for many world economies to predict future changes. Consequently, the decrease in market rates happened, and professionals struggled to return to this sphere’s previous success. The decreasing trend happened in many other areas under economic leaders’ responsibility. Most of the effort invested in one aspect of the economy slows down other important parts of it. Consequently, such problems as unemployment and increasing poverty rate began to negatively affect the economy and increase the turnover of the crisis of 2008. According to Sirui (2021), the lack of attention to the spheres that are not connected to finance caused consequences that have not been restored till these days.
The financial crisis in 2008 helped many economists understand the importance of multitasking skills, as all areas of the economy should stay under control during complicated times. Kohler and Stockhammer (2020) state that one of the most important lessons taken from the subprime mortgage crisis is analyzing future perspectives. When economists can control every aspect of their department and predict future changes, the pressure of coming financial problems might be decreased. During the COVID-19 pandemic, economists are applying solutions created during the crisis in 2008, and the economic situation in the world does not show a massive decrease like it could have been predicted.
To conclude everything that has been stated so far, the uncertain times of the crisis in 2008 brought a huge number of negative outcomes to the world. However, professional economists worldwide gained important experience in finding the right solution to future financial trouble that might arise. The COVID-19 issue, which affected the whole world, is an example one of the most common economic strategies’ implementations that helps the modern world protect the rapid decrease in the financial area of people’s lives.
References
Brem, A., Nylund, P. & Viardot, E. (2020). The impact of the 2008 financial crisis on innovation: A dominant design perspective. Journal of Business Research, 110, 360-369.
Gray, D. F., Merton, R. C. & Bodie, Z. (2019). A Contingent Claims Analysis of the Subprime Credit Crisis of 2007-2008.World Scientific Reference on Contingent Claims Analysis in Corporate Finance, 321-377.
Kohler, K. & Stockhammer, E. (2020). Growth models in advanced countries before and after the 2008 crisis: competitiveness, financial cycles and austerity. Post-Keynesian Economics Society, 1-43.
Sirui, W. (2021). Comparison between the COVID-19 Epidemic and the Global Credit Crisis in 2008. Advances in Economics, Business and Management Research, 166, 379-382.