Current Events and Comparative Statics

Sara Sutherland

A0987987

APEC 2010

Prof. Sutherland

9/20/17

Zika Virus: The Markets for Mosquito Repellent and Airline Tickets

The Zika virus, which was originally documented in Uganda in the 1940s, reached the Americas

in 2015. The Zika virus is a disease primarily transmitted by mosquitoes and is linked to birth

defects such as Microcephaly when contracted during pregnancy. The rapid spread through

Brazil, and further through South and North America has had dramatic impacts on the mosquito

repellent industry and the tropical tourism industry. Zika has increased demand for mosquito

repellent products like bug repellent spray, wrist bands, and clothing. Between May of 2015 and

May of 2016, the average price for bug spray purchased online increased by 23%1. Figure one

below illustrates graphically the impact of an increase in demand for mosquito repellent on the

equilibrium price and quantity of mosquito repellent. The original demand curve for mosquito-

repellent, D1. Once Zika becomes wide-spread, the demand curve for mosquito-repellent shifts

out to D2. The result is an increase in both the price of mosquito repellent and the quantity of

mosquito repellent sold.

The Zika virus may have increased demand for mosquito repellent, but its impact on the demand

for airline tickets has been the opposite. The demand for airline tickets to regions hit by

mosquito-borne illness decreased by 3.4% between 2015 and 2016. The number of tourists

visiting Florida in the fall and winter dropped by 14.84% after cases of the virus were highly

publicized. 2 Figure two below illustrates the impact of Zika virus for airline travel to regions

impacted by the disease. Demand shifts from D1 to D2, resulting in a lower price and quantity for

airline tickets. If airlines supply of flights to these regions is relatively elastic, some flights to this

region will be discontinued, decreasing the supply airline tickets to this region. This scenario is

depicted in figure three where both demand and supply curves shift. When supply and demand

1 https://www.cbsnews.com/news/as-demand-for-bug-spray-raises-on-zika-fears-so-do-prices/

2 http://www.foxnews.com/travel/2016/09/27/zika-virus-has-many-americans-rethinking-fall-

travel-to-florida.html

Sara Sutherland

A0987987

APEC 2010

Prof. Sutherland

9/20/17

both shift inwards, the quantity of airline tickets will be reduced, but the impact on price is less

clear. In figure 3, there is no apparent change in price because the impact of decreased demand

and supply cancel one-another out. This may not be the case in reality, and one curve may shift

more than the other, either increasing or decreasing price.

Sara Sutherland

A0987987

APEC 2010

Prof. Sutherland

9/20/17

Figure 3

Berr, J. (2016, May 27). For consumers, avoiding Zika is getting more expensive. CBS news.

Retrieved: https://www.cbsnews.com/news/as-demand-for-bug-spray-raises-on-zika-fears-so-do-

prices/

Vora, S. (2016, January 28). How the Zika Virus is Affecting Travel. New York Times.

Retrieved: https://www.nytimes.com/2016/01/29/travel/how-the-zika-virus-is-affecting-

travel.html?mcubz=0

(206 September 27). Zika virus has many Americans rethinking fall travel to Florida. FoxNews.

Retrieved: http://www.foxnews.com/travel/2016/09/27/zika-virus-has-many-americans-

rethinking-fall-travel-to-florida.html