Impact of Political Violence on Forces of Supply in a Market

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There are many factors that affect supply of goods and services in any given market. These include: weather, season, disasters, government subsidies and taxes and political climate. Currently there are many cases of violence that are witnessed in different parts of the world.

Pakistan has seen the longest wave of violence during the current times. The country has not breathed a sigh of relief since the 1990s when inter ethnic wars erupted between Pakistanis and Israelis.

According to the Khaleej Times (2012), many lives have already been lost in Karachi this year yet we are only in April. In addition to the loss of life, what is capturing the attention of analysts in the Middle East is the impact that the violence is having on the economic activities in Pakistan.

When there is political violence in a country, this negatively impacts the markets. Suppliers are unable to transport goods from one part of the country to the other due to fear of attacks.

Service providers are also afraid to open their shops as they shy away from criminal activity and violence. When traders are unable to transport goods and services from one place to another, it affects business activities which require the maximizing of time utility.

In order to meet demand, traders are required to get products from producers to the final consumers. This process involves transportation via road, air and rail which is crippled if there is violence in the country.

When this happens, the demand remains unaffected whereas the supply is cut short. This in turn results in excessive demand and scrambling of the little supply that is available.

In Karachi, about 300 people have already been killed due to political unrest. Aspects of ethnicity play a part in the violence since political parties in Pakistan are based on this. This violence affect economic activity since whenever there is a killing of political leaders shops and markets are forced to shut down as revenge attacks are sought in the streets.

Violence is not ideal for markets as it disrupts supply activities which are needed to avail goods to consumers. In Pakistan, markets are not driven by the forces of demand and supply since availability of goods is never guaranteed. The few suppliers who are courageous enough to avail goods and services end up charging prices that they want.

Price elasticity is unheard of in Pakistan due to the scourge of violence. Price elasticity of demand is the responsiveness that the demand for a good has in relation to a change in the price. There is no price elasticity of demand in Karachi because the demand for commodities is unresponsive to changes in price.

This is the resulting impact of violence and political unrest which deprives consumers of the choice to bargain for reduced prices. Violence also makes consumers unable to go in search of lowly priced goods if sellers increase the cost of commodities.

It limits mobility of consumers who become fearful for their lives. Violence in this city has caused commodities to have price inelasticity which is not beneficial to the innocent consumers.

Violence also limits the options that consumers have trying to satisfy their needs. When there is political unrest, sellers are unable to get a wide variety of goods and services since there is no freedom of movement and time to shop around.

Consumers are thus forced to buy the products that are available at the shops when they have a need. The people of Karachi hence do not shop and buy from a wide variety of goods and services. There are no substitutes in the market since sellers do not get the liberty to access many producers.

This makes bargaining impossible for there are limited stocks of goods which do not even have substitutes. The products that sellers manage to get are the ones that consumers are forced to purchase during political unrest.

The impact of violence on markets makes a country unable to develop because the markets remain dormant and investor confidence reduces. The Khaleej Times (2012) reported that recently, the city of Karachi was closed for an entire 6 days yet it is the main source of tax revenue for Pakistan.

The market of Karachi contributes the majority of the sales revenue of the Pakistan economy. During the six days when the city was closed, 62% of the sales revenue of Pakistan was affected.

The government revenue was also compromised since the city brings in 70% from tax revenue. This depicts the significance that markets have on any economy since they form the basic unit that builds the national economy.

Contrary to what is being experienced in Karachi, the forces of demand and supply are what should control prices in a perfectly competitive market. Pakistan is not a country under dictatorship and so markets are not monopolistic by nature.

Even though violence interrupts supply of commodities, there should some degree of price inelasticity so that sellers do not increase prices when there is no need.

Availability of substitute goods will also make it difficult for consumers to lack an affordable brand of commodities if the prices of popular products have increased due to limited supply. Substitutes would help the people of Karachi to obtain essential commodities even during times of violence and limited supply.

Reference

Khaleej Times 2012, ‘Karachi violence takes economic toll’. Web.

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Impact of Political Violence on Forces of Supply in a Market

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