Supply side shocks

Supply side shocks - COVID-19

There have been many consequences because of COVID-19. One such consequence is the disruption in the supply chain. At the start of the pandemic when people, like factory workers got infected they were quarantined and treatment was given. At the first stage when one employee was affected the company allotted additional work to the non-infected factory workers. But after some time since many people got infected the factories were forced to close because of the shortage of labor. Salaries were also not given in the short term and many people were also laid off. This condition was prevalent at the start of the pandemic and is continuing even now in some parts of the world.

Since labor is a variable cost in the short term the employers can lay off the employees but they will also incur costs such as capital which are fixed costs in the short term.

Some industries were affected even when they had large supply, like the milk industry. A cow gives milk daily and milk supply is almost at the same level every day. When the pandemic was intense there were countrywide lockdowns implemented because of which transport got affected. Educational institutions, restaurants, Small scale industries were forced to close. Transport was also stopped and shops were opened only for three hours.

Since the transport sector got disrupted the farmers were not able to sell their milk and started dumping them in their fields. The minimum support price given by the Governments were very much less than what they would get. But, in the case of retail shops, people were fighting for getting milk as there was no stock at the retail level.

So, I conclude that a decrease in the transportation of the product also results in disruption of supply.

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