Face mask prices show how the laws of economics work
By XN Iraki | October 6th 2021
A message still on my phone dated May 6, 2020 has a quotation for a packet of 50 masks going for Sh4,500. Today, that same packet goes for about Sh350, a significant drop from Sh90 for one mask to Sh7.
Mathematically speaking, masks were 10 times more expensive one year ago. Imagine if the price of petrol went down by that much, we'd be paying about Sh10 per litre.
What happened? The laws of economics came into play. The demand for masks was very high and the supply was very low. To share out the few available masks, the price had to go up. Selling masks was very lucrative. Even stealing from whichever source was very profitable.
But rarely can you make money alone. Entrepreneurs imported masks or started making them. Even tailors made them for us. Branded masks became common. Importers or manufacturers got into this market and supply went up. We even started getting free masks. The price started going down. Remember, the demand stayed the same and the population did not grow overnight.
Today, you can even get a mask for Sh5 on the streets, you can worry about the quality later. Someone might ask why didn’t the price go up when the government demanded that everyone wear masks? Substitutes did the work. We looked for the cheapest mask or substitutes to satisfy the police.
Why has the market for other products or services not behaved the same way? For example, why has the price of medical services not gone down despite the mushrooming of many clinics including herbal ones? They are not many enough. Matatu fares would be much higher if there weren’t so many matatus. If we make it easy for anyone to get into a market, consumers benefit from low prices but not necessarily better quality. New entrants often segment the market. Have you seen the many types of masks in the market?
Regulators come up with rules to ensure fair play, competition and no cartels. Anyone who says the government has no business in business is not telling the truth. Laws of economics work well where regulation works well.
Unfortunately, regulation is not a perfect science. Self-interest and vested interests come into play. Why has the price of power been so high yet there is an oversupply of power in the market?
Why is the price of petrol so high? Why not let anyone who can import petrol do so? We shall increase the supply and the price will fall. The mask market shows how the market can work if allowed to. We should let other markets work.
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