Toilet Paper Wars!

lesson plan economics supply and demand shortages

This economics lesson is designed to be conversational and relies on materials in the home in order to accommodate parents thrust into an involuntary home learning environment as well as online educators.

Toilet Paper Wars!

The lesson can be taught directly from this plan or using the included slide deck and handouts.

Materials

Key Learning Objectives

The competing forces of Supply (the combined interests of producers) and Demand (the combined interests of consumers) are engaged in a dynamic balancing act to determine the quantity of a product or service to produce and the price at which it can all be sold.
Prices communicate important information to both producers and consumers about how much of a good or service to produce and how much will be available to buy.
Changes in the market may change the buying behavior of consumers and the production behavior of producers.

Key Concepts

Demand

The quantity of a good or service that people are willing to buy changes relative to the price of the good or service.
The total quantity of a good or service that all consumers are willing to buy at different prices is called Demand.
As the price of each unit of a good or service increases, people usually buy less of that good or service.
Other market factors may change how much of a good or service people are willing to buy at every price. This is a shift in demand.

Supply

The quantity of a good or service that people are willing to produce also changes relative to the price of the good or service.
The total quantity of a good or service that all producers are willing to sell at different prices is called Supply.
As the price of each unit of a good or service increases, producers are usually willing to make and sell more of that good or service.
Other market factors may change how much of a good or service producers are willing to make and sell at every price. This is a shift in supply.
There is a price at which the quantity of a good that consumers want to buy is equal to the quantity that producers want to sell. Economists call this price the Equilibrium Price.

Shortage

A shift in supply or demand may change the equilibrium price.
If a shift in supply or demand is not matched by a shift in the selling price, the quantity demanded of a product will not match the quantity supplied of that product.
If the quantity supplied is greater than the quantity demanded, because the product is priced above the equilibrium price, there will be a surplus of the product.
If the quantity demanded is greater than the quantity supplied, because the product is priced below the equilibrium price, there will be a shortage of the product.
The surest remedy for either a surplus or a shortage is to allow the selling price to shift towards the equilibrium price.

Foundational Skills

Before you begin this lesson activity, you may want to brush up on the basics of supply and demand and how they interact to help establish market prices. Econ Lowdown from the Federal Reserve Bank of St. Louis has some great lessons with interactive charts and graphs to help make these tricky concepts easier to understand.

For younger learners, “The Tuttle Twins and the Messed Up Market” children’s book might be a fun way to introduce the foundational concepts of supply and demand.

Lesson Activity: How Much TP?

Background:

Consumers are the people who buy and use goods and services, such as toilet paper. Most of us purchase toilet paper without too much thought. We are able to buy a little more than we need each time we go to the store because toilet paper has a long shelf life. During our next trip to the store, we can buy a large package, a small package, or perhaps none at all. Of course, if we find ourselves out of toilet paper between regular grocery shopping excursions, we can usually make a quick stop at any grocery store and pick up what we need.

Whether we realize it or not, we frequently check our household demand for toilet paper against our household supply. Each time you take a trip to the bathroom, you may notice how large the roll of toilet paper is on the dispenser. If you have additional rolls in a holder nearby, you may notice only one roll remaining. That information tells you when you need to replace the roll on the dispenser, refill the TP holder, or even make a special trip to the store to buy more. Many skilled household managers can make such decisions with near robotic precision. Until something changes, that is.

Set-up:

In order to complete this activity, you will want to have a package of toilet paper nearby. If you don’t have your preferred brand available at the moment, look it up on the website of your favorite grocer. A picture showing empty store shelves might also be useful.

Explain:

To begin, watch this short film about a toilet paper shortage in 1973 and discuss the following questions:
Was there a sudden shift in the supply of toilet paper?

Was there a sudden shift in the demand for toilet paper?
Did the price of toilet paper change?
What caused stores to run out of toilet paper?

Engage:

Take an Inventory

Tell your learners that you are going to do a quick household inventory of toilet paper. You may use the inventory handout provided in Materials.

You may have different brands of toilet paper in your house, or perhaps different size rolls. On the inventory sheet or a piece of blank paper, count how many rolls you have of each different variety. Also, note how many sheets are in each different type of roll.

Is this more toilet paper than you usually have in the house? Less? About average?
What are some factors that may influence how much toilet paper your household uses this week?
Do you think you will be using more or less toilet paper than is typical?
How long do you estimate that this current inventory will last?
Do you think you have enough?

How Long Will It Last?

Visit the toilet paper reserve calculator at https://howmuchtoiletpaper.com/ and calculate how many days worth of toilet paper you have in your current household supply. Please note, this calculator tool is designed by software engineers in the United Kingdom and toilet paper is produced differently in other countries, so make sure you adjust the values using the Advanced Options tab.

Based on this calculator tool, how many days will your household toilet paper supply last?
Will you be able to buy more toilet paper before your current supply runs out?
How could you make your supply last longer?

How Does This Relate to What's Going on Now?
Watch this short news report from March 20th on the current toilet paper shortage. According to Scott Luton, CEO of Supply Chain Now, this is not a supply problem, but a demand problem.

Why do you think the demand for toilet paper has increased?
Has the selling price of toilet paper increased?
Has the equilibrium price of toilet paper increased?
If this is not a supply problem, why are many stores still unable to keep toilet paper stocked on their shelves?

Discuss:

Below you will find several different scenarios in which you will be asked to consider current events from the perspective of many different types of people. Read through each scenario and discuss what you might do in that situation. These are available as handouts in the Materials section.

Scenario One: Panic Buyers

For a few weeks now, you have heard stories about a highly infectious illness that is causing problems in a faraway country, but you aren’t too concerned. There have been no reported cases of this illness within hundreds of miles of your home. Yet, those news stories of entire cities being told to stay indoors and not leave the house have you worried about what might happen.

As you are out doing your regular grocery shopping, you grab a few extra items that you think you might need, just in case things do get bad. You’re not afraid, and you certainly don’t want other people to think you are, so you try to be discreet about it. But then you see another shopper with an entire cart full of toilet paper and bottled water. In fact, the more you look around you, you notice nearly every cart has two or three large packages of toilet paper.

What do you do and why?

Scenario Two: Demand Shock

You are the night manager at a grocery store. You oversee the employees who restock the shelves and track inventory each night. Several times each week your employees update product displays, sales promotions, and product prices.

When you show up for your shift, the day manager is visibly frustrated. “It’s gone!” she says. “The shelves are completely empty in paper goods and I don’t know what to do. We already put out all of our existing inventory. I know there is another truck coming in tonight, but nowhere near enough toilet paper in this order. We were not prepared for this. If we don’t do something to stop it, we won’t have any more toilet paper for at least a week! What are we going to do?”

Option A: Have your employees put out all of the new inventory as soon as it is unloaded off the truck. First come, first served.
Option B: Put up a sign at the end of the paper goods aisle that reads “Only one package of toilet paper per customer” then place a couple of employees there to hand it out to customers.
Option C: Stock all of the toilet paper like you normally would, but only after an employee went through and doubled all of the prices.
Option D: Put up a sign stating that customers could purchase one package of toilet paper at the regular price, but each additional package would cost ten times as much.

Which option do you choose and why? Can you think of any other options that you might choose as the night manager?

Scenario Three: Market Realignment

You are the Chief Marketing Officer for a large company that specializes in online reselling of consumer products. You check the daily reports showing the latest trends in consumer buying behavior. As you go through your normal morning routine, double-checking your calendar and sipping your coffee while your virtual assistant reads you the latest news, you hear something that stops you cold. “Repeat that!” you bark at your virtual assistant.

“Sure, I’ll repeat that for you. NCSolutions reports that toilets paper sales jumped nearly 900% overnight to become the top-selling product in U.S. grocery stores[1].”

You dig a little deeper. Sure enough, toilet paper, which is usually in the top 30 for grocery store sales, was the number one selling product in grocery stores and drug stores on March 10th and 11th. You’ve never seen such a drastic jump in any product since you took this position.

Before you can even process what to do with this information, your phone rings. It is a reporter from a national broadcasting company seeking your commentary on sellers using your online platform to sell toilet paper for five times the price charged in grocery stores.

"We are taking this situation very seriously,” you say. “We are investigating these claims and will take swift action in the best interest of our customers. That is all I can say for now,” and you hang up the phone.

The morning news is running a special story about toilet paper shortages in stores. The stores don’t have any left. But sellers are making toilet paper available through your platform. Sure, the prices are high, but a 900% spike in demand will do that, right? And expensive toilet paper is better than no toilet paper. Right?

But then you see the Attorney General come on the news show talking about price gouging laws and how your primary competitor has already agreed to shut down and report any sellers who were not already in the business of distributing paper goods[2]. You don’t like the public perception of the high prices the sellers are charging, but shutting down these sellers means your customers will have no way to get any toilet paper.

What do you do and why?

Scenario Four: Logistical Nightmare

You are a dispatch manager for a long-haul trucking company. You’ve seen the stories about store shelves being emptied and you knew the next couple of weeks were going to be a nightmare. You even called in a few guys who used to run trucks for you during the peak winter distribution season just to help haul some of these orders from the grocery distribution centers.

You can barely hear your cell phone ring over all of the activity in the trucking yard, but when you answer it, you can hear one of your drivers on the other end. He is fuming mad because the warehouse says they can’t unload his truck for at least four more hours. He still has two more deliveries to make, but will go over his Department of Transportation (DOT) set maximum on-road hours before he can even make it to his next stop.

Just then, a text message comes in from another driver with a similar story. This isn’t an isolated event. None of the distribution centers can get trucks unloaded in a timely manner. You don’t want to pay drivers for sitting around, and you certainly don’t want to incur any DOT violations and the fines that come with that. But if you don’t get these drivers out on the road as soon as possible, you’ll get even more backed up. Maybe you can just get them to wait a little bit before they get on the road.

As you try to explain to your drivers why they are being delayed, one of them says “Hey boss, I’ve been hearing rumors of truck stops and fast food joints being shut down. If we can’t get food or take our DOT required breaks, we can’t drive.”

What do you do and why? How does your choice here affect each of the people in the previous scenarios?

Discussion Questions:

How is the “inventory management” of your household toilet paper supply similar to the decisions made by each of the people in the four scenarios? How is it different?
Compare the current toilet paper shortage with the toilet paper shortage of 1973 (shown in the first video). How are they similar? How are they different?
Are consumers wrong to engage in “panic buying”?
What steps can be taken to reduce panic buying?

Critical Connections: What is Price Gouging?

On March 23, 2020, Amazon published this blog post (available as a handout in the Materials section) regarding their stance toward sellers using their platform to engage in price gouging. Read through the blog post and see if you can answer the following questions:

How does Amazon define price gouging?
How much is the price of a product able to rise before it is considered to be an act of price gouging?
Does Amazon’s policy on price gouging take into account shocks to supply chains or sudden increases in demand?
What does Amazon do if they decide a seller is engaging in price gouging? How does this help prospective buyers?

Media Toolkit

“Is Price Gouging During Emergencies a Good Thing?”
Professor Steve Horwitz on CNN, 9/9/2017

https://money.cnn.com/video/news/2017/09/09/price-gouging-during-emergencies.cnnmoney/index.html

“Is Price Gouging Immoral? Should It Be Illegal?”
Professor Matt Zwolinski at Learn Liberty, 4/18/2012

https://www.learnliberty.org/videos/price-gouging-immoral-should-it-be-illegal/

Endnotes

[1] https://www.adexchanger.com/ecommerce-2/ncs-toilet-paper-hoarding-increased-sales-845/

[2] https://fortune.com/2020/03/23/amazon-walmart-ebay-price-gougers-coronavirus-supplies-covid-19/