On November 17, 2019, the
first case of COVID-19 or as some call it, coronavirus was discovered inside
the body of a 55 year old in the Hubei province in China. This was about a
month before the world discovered the disease running rampant through the city
of Wuhan, China. Fast forward 4 months and COVID-19 has spread across the globe
and accounted for thousands upon thousands of deaths worldwide. Many people in
the United States didn’t initially take the outbreak seriously; ignoring the
rules countries had put in place for people to remain inside and away from
other people. But once it spread throughout the United States, mass hysteria
began and people started to go wild. From price gouging items like hand
sanitizers and medical masks, to people buying hundreds of rolls of toilet
paper and hoarding them. The disease has turned the world upside down. This
paper will show you the economic impact that COVID-19 has made in the United
States and how some people have reacted to the crisis.
Almost immediately when the
outbreak started, we quickly started hearing of people beginning to hoard
toilet paper, sanitizer, and other household items that people believed they
would need for the long run. Images of people with shopping carts full of
toilet paper surfaced on social media, only fueling the mass hysteria and
leaving other people to believe that they should do the same. Jay L. Zagorsky
of the Honolulu Civil Beat said this about modern economies and hoarding.
“Modern economies run on trust and confidence. COVID-19 is breaking down that
trust. People are losing confidence that they will be able to go outside and
get what they need when they need it. This leads to hoarding items like toilet
paper.” (Zagorsky,
2020) This
actually isn't the first time Americans started to hoard toilet paper during
widespread panic. In 1973, Americans believed that they were about to encounter
a low supply of gasoline and electricity. When a press release by the
government alluded to a shortage of toilet paper and famous late night television
host Johnny Carson joked about it, Americans panicked and choose to buy out all
the toilet paper they could find. Are the choices of the American hoarder
rational?
Imagine, in the course of
a day, you overhear many people speaking of buying toilet paper due to
COVID-19. Upon hearing this new information, economists assume, people engage
in rational behavior; do the best you can, based on your values and
information, under current and anticipated future circumstances (Sexton, 2016,
p. 6). Now the shelves of many retailers are empty.
They’re dealing with an overwhelming demand. If you expect to satisfy the
bathroom needs of tomorrow, it’s expected of you to buy today. Paolo
Pasquariello, a finance professor at the Ross School of Business, stated this in
a web-based article. “During a period of crisis when people think that we might
have to be at home for days or weeks at a time without being able to go out,
well, you need toilet paper so you start going to the store to buy it... ...
Ethics and morality have nothing to do with it. If you know that people are
going to the store to get toilet paper, you have to go to the store to get
toilet paper” (Karoub, 2020, para. 7).
Pro, rational behavior or con, greater scarcity ensues.
Scarcity is defined as
the state of being scarce, or in a short supply, which many of us know as a
shortage. As we all know, there is a toilet paper shortage right now in
America, due to the COVID-19 pandemic, which can be affecting us all in
different ways. Scientists say that many people are stockpiling toilet paper
due to fear of the unknown, fear of running out, and fear of what could be
coming. After the 2011 earthquake and tsunami that devastated Japan,
researchers at Hitotsubashi University studied buying patterns and concluded,
“That particularly anxious households appear to have bought anything that they
could lay their hands on” (Frankel, 2020, para. 3). Which is what is being seen
by all of us from stores all over right now. Procter and Gamble, a large
supplier of toilet paper, has said they are having trouble keeping up with the
high demand, but they themselves and stores are working as hard as they can to
keep up with the high demand of toilet paper, which is causing scarcity and
price changes.
During all the corona
virus panic, a term we continue to hear is price gouging. To better understand
price gouging we need to first understand what it means. Price gouging occurs
when a seller increases the prices of goods, services or commodities to a level
much higher than is considered reasonable or fair. Usually, this event occurs
during an emergency. Hand sanitizer and face masks in particular are
susceptible to price gouging, with reports that prices went up at least 50
percent higher than average on Amazon while individuals on Facebook and
Craigslist were selling bottles of Purell for as much as $250. While people
that participate in price gouging have received a lot of negative feedback,
companies such as eBay, Facebook, Walmart, and Amazon, also have had to release
statements on their behalf. Companies such as eBay have banned specific
listings of products like disinfectant wipes and hand sanitizer or any other
product that references COVID-19 (Cox, 2020, para. 2). Facebook said it removes
similar listings from its Marketplace. Amazon likewise said it has removed
about a half-million third-party listings for price gouging, and Walmart said
it automatically takes down listings with prices too far above average.
The toilet paper issue in
America due to the COVD-19 outbreak is a real thing. Americans are hoarding
toilet paper causing a V shape curve between those who have a little and those
who have a lot. The fear of missing out means Americans have to act rational
and purchase toilet paper now. Demand for toilet paper has increased causing
scarcities all across America. The demand also resulted in the price increases
to the level of price gouging. Based on the research found above, we implore
all Americans to act rationally during an outbreak like this, or panicking
buying will ensue and cause scarcity. Hoarding and price gouging may hurt those
who truly need the supplies. Wash hands, stay home and practice social
distancing, this too shall pass.
References
Zagorsky, J. L. (2020, March 28). There's Plenty Of
Toilet Paper In The US - So Why Are People... Retrieved March 30, 2020, from https://www.civilbeat.org/2020/03/theres-plenty-of-toilet-paper-in-the-us-so-why-are-people-hoarding-it/
Sexton, R. L. (2016). Survey of ECON (3rd Ed.).
Boston, MA: Cengage Learning.
Karoub, J. (2020, March 27). Financial, economic
actions during crisis may be rational, if not ethical . Retrieved March 28,
2020, from https://m.phys.org/news/2020-03-financial-economic-actions-crisis-rational.html
Frankel, T. (2020, March 13). The toilet paper
shortage is real. But it should be brief. Retrieved from https://www.washingtonpost.com/business/2020/03/13/toilet-paper-shortage/
Cox, K. (2020, March 26). States, feds try to end the
scourge of coronavirus price-gouging. Retrieved from https://arstechnica.com/tech-policy/2020/03/states-feds-try-to-end-scourge-of-coronavirus-price-gouging/
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