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We're in a supply-shortage due to a rapid increase in demand. We could say the increase in demand wasn't "expected" by the manufacturers, but more accurately, they weren't able to anticipate the exact timing of the increase, and were not willing to go to the expense of ramping up production without knowing when the demand would increase. If we went back to Q4 2019, we'd see an economy that had the appearance of being good, Trump's re-election being more likely than not, and the demand for guns fairly flat through the end of 2020. The pandemic, economic plunge, Trump's peril, anti-police race riots, and a nation on the edge of the worst instability in many decades was not foreseen, or at least the timing of it was sufficiently uncertain that gun makers weren't going to go full-bore producing millions of guns that buyers would have left unbought had there not been chaos, panic, and fear.
In the charts, the red line is supply, and the blue line is demand. The third chart shows a shortage situation like we have now. To bring the market into equilibrium, the supply can increase to meet the demand, but it takes time for gun makers to make millions more guns. They will be reluctant to go to great expense to increase their production capacity with more workers, more machines, additional factories etc., because they know their business is cyclical. The demand could be all gone by the end of this year. Since there's little danger of a new gun maker entering the market in a short time to fill all the unmet demand, they will not increase production by much. This is true for ammo also. The other thing that can bring the market into equilibrium is for demand to decrease. One way to reduce demand is to raise prices. How many people will buy a Glock at $1200? A lot less than will buy one at $400. Instead of selling 1,000,000 handguns at $400, if there is demand for 1,000,000 at $600, why not raise the price? Keep raising prices until the supply and demand are in equilibrium.
