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Micro and Macro Economics in Action! Why is there a chip shortage?

Geoff Riley

28th August 2021

This BBC clip looks at the impact of the global chip shortage on the world economy, with bottlenecks in different sectors and impacts for firms and individuals.

You'll see from the article that this is a really important economics news story which has both micro and macroeconomic implications. This is a story that shows demand and supply in action and how this feeds through to wider macroeconomic consequences.

So it is a good one to read if you are starting out on your economics study journey.

What happens in one part of our inter-connected global economy can have serious repercussions for distant industries and countries. More here on what this might do to prices of your digital devices when you come to buy a replacement.

How long will the chip shortage last? Most estimates see the problem lasting through 2021-22 and perhaps even longer. Will the price mechanism respond in the usual ways? Chip manufacturers are responding to sustained global demand by increasing capacity but that takes time.

"The bottom line is: the pandemic accelerated an already precarious situation for chip makers - we're in the middle of a tech boom, supply can't quite keep up - and it won't get sorted out overnight."

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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