The Effect of the Pandemic on Hand Sanitizer Demand and SupplyÂ
Group (in alphabetical order):
Kiana Lynn Burnett (64165073)
Nicholas Evangelos Georggin (74892012)
Cherry Dang Khuc (74908795)
Shannon Simone Thompson (79858235)
When the COVID-19 pandemic began, many people across the world sprawled into a panic. Staying clean and sanitary became a necessity. Due to many CDC regulations and suggestions, one of the best ways to stay sanitary in keeping away from the virus was by washing one’s hands for at least 20 seconds. However, a sink with running water and a bar of soap was not always accessible for many. The main solution to cleaning one’s hands in a quick and efficient manner was through the use of hand sanitizer (“Handwashing in Communities”). According to the CDC, it was recommended that consumers should use an alcohol-based hand sanitizer that contains at least 60% alcohol by volume. At the beginning of the pandemic, the demand for hand sanitizer had increased dramatically, almost becoming necessary for many people to go about their daily lives (“Handwashing in Communities”). According to United States Pharmacopeia, the demand for alcohol-based hand sanitizers had surpassed its normal demand-supply equilibrium amount and thus created a shortage of traditional hand sanitizer. The consumer demand for hand sanitizer increased drastically and created a smaller supply of hand sanitizer as a result (“Hand Sanitizer Toolkit”). We will analyze several aspects of this shift in the hand sanitizer market as caused by the COVID-19 Pandemic.
Picture from (“Hand Sanitizer Toolkit”).
The Increase of Hand Sanitizer:Â Â Â
Forbes Business Insights reports that COVID-19 has brought along “a rapid demand in hand sanitizers across [the world]” (“Impact of COVID-19”). With the large increase in the demand for hand sanitizer, there existed a subsequent increase in price as illustrated in the graphic below.Â
Figure A. Hand Sanitizer Equilibrium (Considering Changed Demand).
With an increase in demand, the blue D-curve in the graph above will move toward a greater quantity demanded (i.e. further in the positive direction along the Q-axis). This causes the new demand D’-curve to indicate an equilibrium of a higher price and higher quantity demanded. This means that, due to greater demand, the price will have to be higher in order to compensate for the greater quantity demanded.
While the demand for hand sanitizer increased in this manner and the equilibrium point was shifted, less hand sanitizer became available in order to attain this new equilibrium. CNBC reports that several firms around the world set rations on the quantity of hand sanitizer that could be bought. This means that people were required to buy a lesser amount of the product in question for a higher price than what it was initially (Taylor). Because of this, the supply of hand sanitizer as represented on the graph is shifted in the direction of a lesser quantity of hand sanitizer (i.e. further in the negative direction along the Q-axis).Â
Figure B. Hand Sanitizer Equilibrium (Considering Both Changed Supply and Demand).
With the supply decrease as mentioned above, the red D-curve in the graph above will move in the negative-Q direction to produce the orange S’-curve. This shift causes a subsequent shift in the point of equilibrium. Because of considerations made with respect to both demand and supply as explained above, the equilibrium price of hand sanitizer is much greater than what it was initially. Also, since there was a shift in equilibrium in both the positive and negative directions, the change in equilibrium quantity is depicted here as negligible. In the end, this means that consumers would be required to pay more during the pandemic to enjoy the same quantity of hand sanitizer that they used to buy at a lower price before the pandemic.
The COVID-19 pandemic caused panic as people around the world feared that they would indeed catch the illness if they were not careful. Hand sanitizer was a way for people to protect themselves against the virus and to continue in this very effort. However, the increased demand and diminishing supply of hand sanitizer were caused by this sense of panic, and as such, local stores sold out of hand sanitizer quite often during this time. The New York Times reported that “Shoppers had already picked the shelves clean of recognizable brands like Purell, Germ-X, and even local drugstore formulations” (Han). The article further states that people tried to remedy this by taking to the internet to shop for other more readily available hand sanitizers to be delivered to their homes. This led to online parties selling their own small and relatively unknown hand sanitizer brands for upwards of $100: much more than the initial equilibrium price of hand sanitizer (Han).
These actions perpetrated by price gougers were charging above the now-increased competitive market equilibrium price in order to increase their revenue and, by extension, their own profit. Total revenue is defined as the total quantity produced multiplied by the price of the product, while profit is defined as the revenue minus the cost. Assuming that it costs the same amount to produce a bottle of hand sanitizer across all firms in a market, then selling the hand sanitizer at a higher price will lead to higher revenue and higher profit as illustrated below.
Figures C and D. Competitive Market Graphic (P=MC=MR; competitive in structure) and “Price Gouger” Market Graphic (P > MC=MR; monopolistic in structure).
(Revenue of the price gougers is above market cost since a competitive market P=MC=MR)
Meanwhile, a number of new brand names came into the hand sanitizer market. Because there was a rationing of hand sanitizer as described earlier, these brands manufactured hand sanitizers using denatured ethanol; the result is a hand sanitizer with a very pungent smell that is not pleasant to use (Han). These two different products – alcohol-based hand sanitizer (Mahmood, et al.) and ethanol-based hand sanitizer (Han) – act as substitute goods. When the available supply of one of these products is down, then the price for that product increases. Since there was too much demand for alcohol-based sanitizers and not enough supply to fulfill that demand, the relationship between substitute goods dictates there would be an increase in the demand for ethanol-based sanitizers to compensate.Â
Personal Testimonials (How this affected us):
Kiana: With the increase in hand sanitizer demand from the general public, it made it harder to stay sanitary on the go. In my personal experience, I would oftentimes have to save and share the bottles we had with my family just to make sure we didn’t run out. Once other brand names started to make more with substitute ingredients, it became much easier to make sure I stayed healthy. I will be honest tho, the alcohol-based sanitizer that UCI uses which has denatured ethanol in it does not smell too nice. There was a period of time when I would actively have to carry my own hand sanitizer in my bag just so I did not have to use the ones UCI provided.Â
Nicholas: When the pandemic started, I was very scared about how I could keep myself well and protect against the virus. Even before the pandemic, I was very careful to wash my hands frequently as a common method of keeping clean. Once the pandemic started, however, I felt obligated to look for other easier or more accessible methods to keep clean. I frequently used a small single-person hand sanitizer that could be carried around in a bag or in a car, yet it was not lost on me how several people around the nation and the world were struggling to find enough hand sanitizers for their own uses. In response to this, I needed to ensure that I was wisely using whatever hand sanitizer I could. I carefully used my own single-person bottle while also using whatever sanitizers were available at school or at other places of business that I visit. Of course, I was still quite scared as I, along with many other people, could not buy as much hand sanitizer as we would have preferred, especially under these COVID-based circumstances. When doing the research for this project and upon discovering the extent to which the market had shifted and price gougers were operating, I was astonished. I found it incredible how there were firms that could take advantage of one of the greatest public health emergencies of our day and charge upwards of $100 for hand sanitizer. We always talk about the characteristics of the market or of a product in this class but seldom do we talk about how the people themselves are personally affected. I suppose that this was an intriguing experience to discover this new dimension of the field of economics; this project has allowed us to learn something new outside of the classroom.
Cherry: The pandemic caused an increasing demand for hand sanitizers and there was not a large enough supply to meet the demand. Thus, many sellers popped up with hand sanitizers made from denatured ethanol. This hand sanitizer does not smell pleasant. I remember my first time out at Irvine Spectrum after the lockdown was lifted. I walked passed a dispenser and put my hand out for some hand sanitizer. I was met with a pungent smell which caused me to run to the restroom to wash my hands with soap and water. I later hopped online to find out that many hand sanitizers smell like vinegar or tequila due to the substitute ingredients used. When my mom saw GermX in stock at Sams Club, we stocked up on 5 big bottles that have still lasted us until now.
Shannon: During the pandemic, my family and I shared a concern to make sure we were all well protected from germs as we could be. This meant bringing a bottle of hand sanitizer along with us no matter where we went. At the beginning of the pandemic, we would find ourselves having to go to third-party stores in order to find hand sanitizer because oftentimes it would be sold out anywhere else. Once other brands started making their own hand sanitizer with different ingredients, we no longer had to go to third-party stores like we once had to. Though at times I would notice that the new brands of hand sanitizers would leave my hands feeling a bit sticky along with an off-putting smell, it resulted in us being able to stay protected against the virus by having something quick and easy on the go to prevent the spread of illnesses.Â
Han, Gregory. “Why Do Hand Sanitizers Suddenly Smell So Awful?” The New York Times, 07 July 2020, https://www.nytimes.com/wirecutter/blog/why-hand-sanitizers-smell/.
“Hand Sanitizer Toolkit.” United States Pharmacopeia, 10 March 2022, https://www.usp.org/covid-19/hand-sanitizer-information.
“Handwashing in Communities: Clean Hands Save Lives.” Centers for Disease Control and Prevention, 30 September 2022, https://www.cdc.gov/handwashing/.
“Impact of COVID-19 on Hand Sanitizer Market Size, Share, Industry Analysis and Regional Forecast, 2019-2026.” Forbes Business Insights, https://www.fortunebusinessinsights.com/impact-of-covid-19-on-hand-sanitizer-market-102719.
Mahmood, Adeel, et al. “COVID-19 and frequent use of hand sanitizers; human health and environmental hazards by exposure pathways.” National Library of Medicine, 10 November 2020, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7320712/.
Taylor, Chloe. “Sales of hand sanitizer are skyrocketing due to the coronavirus, leading to rationing and price hikes.” CNBC, 04 March 2020,
https://www.cnbc.com/2020/03/03/coronavirus-hand-sanitizer-sales-surge-leading-to-price-hikes.html.