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Econ 101

The economics behind why toilet paper is sold out

David Brancaccio and Rose Conlon Mar 19, 2020
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Raising prices might curb panic-buying, but it’s also price gouging. Daniel Slim/AFP via Getty Images
Econ 101

The economics behind why toilet paper is sold out

David Brancaccio and Rose Conlon Mar 19, 2020
Raising prices might curb panic-buying, but it’s also price gouging. Daniel Slim/AFP via Getty Images
HTML EMBED:
COPY

This is part of our “Econ Extra Credit” project, where we read an introductory economics textbook provided by the nonprofit Core Econ together with our listeners.


Price discrimination is baked into a lot of mundane daily transactions.

“If we see a sale; if we see coupons; if the price is different for seniors or students at a movie theater than it is for adults — all of that counts as price discrimination,” said Homa Zarghamee, an economics professor at Barnard College who advises Core Econ, the publisher of the open-source economics textbook Marketplace’s David Brancaccio is reading with listeners.

We’re perhaps most accustomed to it when we’re buying airfare, knowing that purchasing a ticket months in advance will likely be cheaper than buying it the night before.

Price discrimination looks a little different in this era of novel coronavirus, however. On eBay, right now, people are still selling packs of toilet paper at inflated prices given the bare shelves in some stores. Many sellers are presumably profit-seeking scalpers, who grabbed the TP early.

When stores can’t use dynamic pricing when demand surges ⁠— because in an emergency, we call that “price gouging” ⁠— one consequence is the scalping, a so-called “secondary market.” Some see “efficiency” in letting stores or scalpers jack up prices to what ever people are willing to pay.

But, Zarghamee says, you have to account for income inequality.

“Of course, that’s revealing something that’s already true in markets, which is that your willingness to pay determines whether you’re going to get the good to begin with,” she said. “But what gets lost in a lot of this talk is that the term ‘willingness to pay’ makes it in some sense sound like we’re all starting with the same amount of money. And so our willingness to pay is a good indication of how much we actually want something. And that gets very distorted when you have inequality because, really, what willingness to pay is, is your willingness and ability to pay. And so somebody with much higher income will always be willing to pay more because they’re able to pay more.”

Click the audio player above to hear the full interview.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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