Covid-19 pandemic disruptions in the economy

The recent Covid-19 pandemic has created significant disruptions in the economy. Consider the market of hand sanitizers. Demand for sanitizers is growing rapidly as a result of increasing hand hygiene awareness. At the same time, social-distancing rules and lockdown restrictions have an impact on the level of production, reducing the capacity of firms that produce hand sanitizers. Assess how these changes may potentially impact the hand sanitizers market.

Are consumers of hand sanitizers expected to be price-sensitive? Discuss how the price elasticity of demand matters for the new equilibrium outcome.

What will happen to this market if the government introduces a price ceiling, where prices for hand sanitizers are set at their initial (pre Covid-19) equilibrium price level? Critically discuss.

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