Habits and Demand Changes after COVID-19
29 Pages Posted: 15 Jul 2021
Date Written: June 30, 2021
In this paper, we investigate how the COVID-19 pandemics and more precisely the lockdown of a sector of the economy may have changed our habits and, therefore, altered the demand of some goods even after the re-opening. In a two-sector infinite horizon economy, we show that the demand of the goods produced by the sector closed during the lockdown could shrink or expand with respect to their prepandemic level depending on the length of the lockdown and the relative strength of the satiation effect and the substitutability effect. We also provide conditions under which this sector could remain inactive even after the lockdown as well as an insight on the policy which should be adopted to avoid this outcome.
Keywords: Lockdown, Habits, 2-Sector Infinite Horizon Economy
JEL Classification: E21, E30, E60, I18
Suggested Citation: Suggested Citation