The Upward Trend in Medical Mask Prices: Is There Room for Ethics in Economics?

Kristie M., Concordia Applied Journalism

Schools have been delayed, companies are working on contingency plans, and people are dying. For the past few weeks, the number of COVID-19 deaths has increased into the thousands.  More cases appeared worldwide as the virus neared their incubation periods, with a new study from Pharmaceutical Technology suggesting that it could take up to 24 days for the virus to expose itself.

In the supply and demand of masks, the demand shifts up, causing the price of masks to rise up as well.

With recent updates from the World Health Organization warning that the virus could be spread through respiratory droplets produced from coughs and sneezes, a national run on household goods was set off in China. At the top of the list of items that consumers are fighting to lay hands on are facial masks. 

According to Reuters, Cao Jun, a general manager of mask manufacturer Lanhine, factory east of China’s Ningbo city says:

“[Our] firm’s clients are demanding a combined 200 million masks per day compared to its normal production rate of 400,000 a day.”

The demand for masks has drastically risen as a result of mass panic. Dennis Wei, a junior at Carleton College studying Economics, explains the reason behind the rise in mask prices.

“The primary reason for the rise in the price of masks is due to a shortage of masks, Dennis explains. “The demand for masks has drastically risen as a result of consumers reacting to the virus, while the supply of masks has remained the same. This leads to a situation where the demand for masks heavily outweighs the amount of masks produced. This shortage allows producers to charge higher prices as people scramble to secure masks.”

​​​​Shift in supply of masks to the left

In the midst of Chinese new year and the coronavirus outbreak, many migrant workers have been stationed at quarantine areas prior to their return to work. With mask factory workers being held back for quarantine and other safety reasons, the supply of masks in China are becoming scarce.

“In fact, the supply of masks may have actually dropped, as many migrant workers who produce the masks were prevented from returning to work,” Dennis adds. “The lack of workers leads to an inward shift of the supply curve.”

In the face of a mask price spike, some pharmacies in China have been fined for attempts of price gouging and stockpiling. While price gouging isn’t approved of by the Chinese government, this hasn’t prevented people from buying masks at any price.

In Hong Kong, the government has explicitly refused to seek out price-gouging retailers or arrange for masks to be categorized as “reserve commodities” - items that are reserved by the government for times of unexpected events, such as the infamous coronavirus outbreak.

Price Ceiling inserted into the mask market

“Technically, the masks are already in inadequate supply due to production capacity”, Dennis explains. “[Setting up a price ceiling only] leads to a further market shortage as firms who have entered at a higher price will not enter due to the price ceiling.”

As seen with the graph, firms would be making a loss, leading to a total shortage of masks in the market and eventually leaving many people without masks to buy.

“In the absence of the price ceiling, more producers will produce, and despite the high price people will still pay for the masks.”

Price ceiling or no price ceiling, the consumers’ willingness to pay for masks are only increasing amid the rising mortality rate.

When dealing with this situation, many citizens would rather buy masks that are drastically marked up than be faced with a shortage of masks with lower prices. Especially given the new rule implemented by the Chinese government in many cities, which requires people to wear masks when heading outside, people have no choice but to buy ridiculously over-priced masks.