Question

Question 3: (2 Marks) "An increase in the demand for face masks raises the quantity of face masks demanded but not the quantity supplied.” Is this statement true or false? Explain.

Answer 1

An increase in the demand for face mask raises the quantity of face masks demanded by not the quantity supplied.

This statement is true.

Let's take the example of the current global pandemic situation. The recent global pandemic outbreak caused by COVID-19 has resulted in a sudden spike in the demand for face masks globally. However, the quantity supplied remained the same, at least in the short run. This is because manufacturers are unable to increase the supply as quickly as possible in order to meet the growing demand as it is difficult to expand the production capacity in the short run. (That is why supply is less price elastic in the short run as compared to that in the long run.). So, in the short run, this sudden rise in the demand for face masks results in excess demand of face masks in the market, causing shortage of the product.