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Application Paper 1
Hurricane Sandy: The Good and the Bad
MIDN Z
FE210M-5001
Professor Buttinger
11 November 2012
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Introduction: Super-storm Sandy left many small business owners untouched. However, for
some, Hurricane Sandy cost small business owners a fair amount of business; and for others, the
super-storm brought in a surge of customers. In this Application Paper, I will present how the
hurricane affected small business owners in the Washington area.
Economic Concept: Change in Demand (Decrease in demand)
Definition: A change in the quantity that people plan to buy when any influence on buying plans
other than the price of the good changes. When there is a change in demand, there is a new
demand schedule and a new demand curve. The main influences on buying plans that change
demand are prices of related goods, expected future prices, income, expected future income,
number of buyers, and preferences.
Evidence: “The Bulgogi Cart, a Korean food truck often located at L’Enfant Plaza or Farragut
Square during the workweek lunch rush, did not venture out Monday and Tuesday because the
federal government workers who make up a significant chunk of the cart’s customers were told
to stay home.”
Illustration:
When demand decreases, the demand curve shifts leftward from D to D”.
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Argument: According to the article, Hurricane Sandy prevented many employees from going to
work in the L’Enfant Plaza and Farragut Square area. As a result, the owners of the Bulgogi
Food Cart did not venture out earlier in the week because of the anticipated low number of
customers. The text defines a change in demand as a change in the quantity that consumers are
planning to buy based on influences from various variables independent from a change in price.
The main influences on a consumer’s buying plans that change demand include changes in prices
of related goods, expected future prices, income, expected income, number of buyers, and
consumer tastes and preferences. The text also states that the fewer the number of buyers, the
smaller the demand. As it pertains to the article, the decrease in demand resulted from a decrease
in the number of buyers. Due to the super storm that ravaged the east coast, many small
businesses just like the Bulgogi Food Cart anticipated a decreased number of customers due to
the fact that many employees were not coming into work during the days of the hurricane.
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Economic Concept: Change in Quantity Demanded (Increase in quantity demanded)
Definition: A change in the quantity of a good that people plan to buy resulting from a change in
the price of the good with all other influences on buying plans remaining the same.
Evidence: “As winds picked up Monday, the restaurant offered happy hour drink specials
between 11 a.m. and 9 p.m., and the owners decided to offer the deal again on Tuesday as many
D.C. residents were asked to stay home from work again. Lunchtime traffic on Monday and
Tuesday was three times its usual weekday amount, and Monday’s dinner traffic rivaled that of
the restaurant’s usually busy Friday night.”
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Illustration:
An increase in the quantity demanded: If the price of a good falls (P to P’) and all other
influences on buying plans remain the same, the quantity demanded increases (Q to Q’). An
increase in quantity demanded is shown as a movement down the demand curve, shown by the
blue arrow.
Argument: According to the text, a change in the price of a good will result in a change in the
quantity demanded for the good. In the case of this article, the owners of the restaurant DC
Reynolds extended their “happy hour” drink specials thus decreasing the price of drinks for an
extended period of time. As a result, the quantity demanded for drinks increased. The article
claims that the restaurant had three times as many customers during the extended “happy hour”
drink specials during the hurricane.
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Economic Concept: Change in Supply (Decrease in supply)
Definition: A change in the quantity that suppliers plan to sell when any influence on selling
plans other than the price of the good changes. The main influences on selling plans that change
supply are prices of related goods, prices of resources and other inputs, expected future prices,
number of sellers, and productivity.
Evidence: “Kenfe Bellay, owner of H Street Northeast’s Sidamo Coffee and Tea Shop, cut short
the shop’s hours on Monday and Tuesday because he said the majority of his five employees
couldn’t get to work without the Metro.”
Illustration:
When supply decreases, the supply curve shifts leftward from S1 to S2.
Argument: There are several influences on selling plans that affect supply, they include prices
of substitutes and complements, prices of recourses, expected future prices, number of sellers,
and productivity. In the case of this article, the hurricane proved to be an obstacle for employees
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trying to get to work. The Sidamo Coffee and Tea Shop was short on workers because
employees were not able to transit to work without the Metro. As a result, the overall
productivity of the Coffee Shop decreased due to a decrease in labor. According to the text, a
decrease in productivity increases the cost of production and decreases its supply. Hurricane
Sandy prevented employees from coming to work. The super storm limited the amount of labor
for several small businesses and as a result decreased their productivity and supply.
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Economic Concept: Price Elasticity of Demand (Elastic Demand)
Definition: A measure of the responsiveness of the quantity demanded of a good to a change in
its price when all other influences on buyer’s plans remain the same. This becomes an Elastic
demand when the percentage change in the quantity demanded exceeds the percentage change in
price.
Evidence: “Most of the patrons enjoyed a drink or two during the happy hour with their lunch
and dinner, said co-owner Jeremy Gifford, Justin’s brother. Customers likely were experiencing
cabin fever and just wanted to get out of the house, he said.”
Illustration: Price Elasticity of Demand = (%ΔQd) / (%ΔP)
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Argument: The text characterizes price elasticity of demand as a measurement of the
consumer’s responsiveness to a change in the price of a good or service. Moreover, the text
identifies the price elasticity of demand as elastic if the percentage change in the quantity
demanded exceeds the percent change in the price of a good or service. This article exhibits an
instance where a change in price led to a large change in the quantity demanded. According to
the article, the restaurant witnessed a greater quantity demanded for drinks when the prices of
their drinks fell during “happy hour”. The graph in the illustration shows an elastic demand curve
where a small decrease in price leads to a large increase in quantity demanded; as price drops
from Po to P1 the quantity demanded increases from Qo to Q1. This further demonstrates how the
restaurant’s happy hour specials during the storm exhibit an elastic demand.
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Conclusion: In most instances, Hurricane Sandy did not take her toll in the realm of small
businesses. In the few cases however, the super-storm made her presence known. In the cases of
the Bulgogi Korean Food Cart and the Sidamo Coffee Shop, Hurricane Sandy limited their
business ventures due to either a lack of customers or a lack of employees. Other small
businesses however, such as the restaurant DC Reynolds, saw a surge in customers because of
people not having to come into work. Small businesses like DC Reynolds took advantage of the
storm and lured customers in with extended “happy hour” specials and providing a warm and
comfortable atmosphere away from the storm. Whatever the case may be, Hurricane Sandy made
her presence known all around the east coast, even in the small cracks of small businesses.