After you have studied Economics in the News on pp. 116–117, answer the following questions.

a. Why are spirits and hand sanitizer substitutes in production?

b. Why did the increase in demand for hand sanitizer increase the quantity supplied and not increase supply?

c. What would have happened to the supply of hand sanitizer if the price of spirits had fallen?

d. How would the supply of spirits have changed when the price of hand sanitizer increased?

e. What are the powerful market forces that operated in the market for hand sanitizer?

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The Covid-19 pandemic brought changes in prices and quantities in many markets, and one that saw enormous changes is the market for hand sanitizers. The expert advice, presented in social media and the news media, was to wash your hands with soap or use a hand sanitizer. As this message was heard, ever more loudly and clearly, consumer preferences changed and the demand for hand sanitizers soared. The first effect of the increase in demand was a shortage of hand sanitizer. A hand sanitizer is made from alcohol like that in vodka or gin or whiskey-products made by distilleries. So, hand sanitizer and spirits like vodka are substitutes in production. Price (dollars per gallon) 400 300 200 100 Covid-19 increased demand ... So ... and brought a shortage of hand sanitizer Figure 1 Increase in Demand and Shortage D DOL 25 50 60 75 Quantity (millions of gallons per day)