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Why Night Owls and Early Birds Affect the GDP
February 28, 2018
Four Fantastic Charts That Tell What We Need to Know About the Plastic Problem
March 2, 2018
Taiwan has a toilet paper shortage. In one store, it took just 16 seconds for shoppers to empty a restocked pallet. Online at ET Mall, toilet paper sales have been ten times normal.
Below, a crowd at a Taiwan Costco is reputedly rushing for toilet paper:
A panic? No…just some classic demand and supply.
The Story of the Shortage
The catalyst appears to be word of a future price increase. Because retailers have said that prices will go up as much as 30% during mid-March, consumers are hoarding now. If they wait, they will pay USD$8.89 for a toilet paper 12-pack instead of USD$6.84.
Producers have said that the price increase is because of pulp. Representing close to 50% of the toilet paper price, short fiber pulp that used to cost $650 a ton now is $800. With fires in Canada, production problems in Brazil, and higher packing and transport expenses, a 50% increase is even possible.
Our Bottom Line: Demand and Supply
To understand what is happening, we just need to look at our demand and supply curves. But we should distinguish between now and mid-March.
Now: Our graph indicates there is a new equilibrium because of future expectations on the demand side and higher production costs affecting supply. However, retailers have not yet boosted what they charge consumers. That takes us to a price below equilibrium and shortages:
Mid-march: In several weeks, the future expectations impact on the demand side evaporates since the price increase is here. At that time, we just have the supply shift and the higher price:
In addition, as it all unfolds (or unrolls), we have equity markets responding with their own changes in demand and supply:
So where are we? Happy to see that a textbook graph can explain a toilet paper panic.
My sources and more: Seeing the NY Times headline, I knew we had a good supply and demand story. Then, Bloomberg added to the picture with the investor side, the BBC had the details for the supply side’s costs and the Taiwan News had a bit more.
