Case study 1:Toilet paper industry during the COVID-19 pandemic

(10 marks)

Toilet paper became a coveted item in late March 2020 when many cities and states across the country issued shelter-in-place orders in response to the coronavirus pandemic, prompting people to purchase large amounts of household goods.Nearly half of all grocery stores in the United States were out of stock of toilet paper for some part of the day on April 19, the latest date for which figures were available via NCSolutions, a consumer products data tracker.Read the full story byclicking on this link

https://cnr.ncsu.edu/news/2020/05/coronavirus-toilet-paper-shortage/

Based on the above case and information provided in the story, answer the following questions:

1. What would be the effect of this COVID-19 induced shock on the toilet paper market in US ? Draw a diagram to show this effect, analysing changes in equilibrium price and quantities for toilet paper before and after COVID-19.

2. Does this story point to any psychological behaviour affecting the demand for this product that may contradict the law of demand as we know it ? Explain your answer, with a suitable reference.