PART 1: PANIC BUYING OF TOILET PAPERS

Panic buying was one of the top news headlines worldwide amid the coronavirus outbreak. Panic buying occurs when consumers bought large quantities of a particular product and hoard the product due to fears of shortage or price hike in a looming crisis (Arafat, Kar, Marthoenis, Sharma, Apu and Kabir, 2020). In March 2020 when the coronavirus restrictions was imposed, supermarkets and stores in Australian cities found their replenished shelves quickly emptied of food and daily supplies such as toilet papers and had a hard time keeping up with the seemingly insatiable demand from panic buyers. Toilet paper was one of the coveted items in panic buying. Even though authorities reassured the public that there is no shortage of this product given that most toilet rolls are produced locally and plead with consumers to keep calm and buy only what they need rather than buy to hoard, panic buying behaviour persists. Despite toilet paper manufacturing plants stepped up their production operating 24 hours a day and 7 days a week, the supply chain process was just not keeping up with demand. The panic over toilet paper supplies shows no signs of slowing. An economist commented that Australians were panic buying more than the Americans when the March retails sales from these two countries were compared (Wright, 2020). To address the detrimental impact of panic buying, many supermarkets and stores in Australia took to rationing essential items and imposing purchase limit on their customers, as well as modifying their opening hours to cater to vulnerable customers such as the elderly.

There were unscrupulous opportunists, who wanted to take advantage of panic buying behaviour, were re-selling toilet papers they bought from supermarkets at inflated prices on Gumtree, eBay and Amazon. A man from Mortdale, New South Wales (NSW) posted an exorbitant price tag of $550,000 for a 24-pack of Quilton brand toilet papers he sells on Gumtree. It is not known whether his offer has been taken up by panic buyer.

The tension and hysteria from trying to get hold of a pack of toilet rolls could be so high that it has led to physical altercation among shoppers. For example, a man was tasered and subsequently arrested by police on 5 March 2020 after he assaulted an employee and a customer at a departmental store in regional NSW over toilet papers. In a separate incident, a scuffle broke out on 6 March 2020 in a Sydney supermarket over toilet rolls between shoppers that police had to be called to the scene to intervene. There were also viral videos of physical altercations and heated exchange between shoppers and/or with employees at supermarkets in other Australian states. Besides Australia, panic buying also occurred in Hong Kong, the UK, the US and Singapore. The desire for toilet papers was so intense that an armed gang robbed a shop in Hong Kong of 600 toilet rolls that was actually worth a total price of about US$130 (BBC News, 2020).

Victoria University Business School

4

The Australian Bureau of Statistics (ABS, 2020) reported that Australian retail turnover rose 8.5 per cent in March 2020 with unusually high demand in food retailing, household goods, and other retailing. This unprecedented demand was the result of panic buying. However, social distancing regulations have led to a 20% fall in sales for cafes, restaurants and takeaway food services, and discretionary spending in clothing footwear and personal accessory retailing, and department stores as shown in Figure 1. Figure 1 also shows that toilet and tissue papers experienced a 100% increase in sales in March 2020 as compared to February 2020.

Figure 1: Percentage change in retail sales in March 2020 as compared to February 2020

The shortage of toilet papers due to panic buying has also resulted in consumers making the switch to what they perceived as substitutes to this toiletry item. The wastewater authority in North Melbourne in the State of Victoria found not only baby wipes and paper towels were used as substitute of toilet papers but also cut-up bed sheets. Unfortunately, these substitute products do not disintegrate in a timeframe similar to toilet paper and their disposal (particularly cut-up bed sheets) into the wastewater system can cumulatively lead to serious sewage blockages, damage to household drainlines, septic systems, wastewater networks and infrastructure. Users and non-users of these substitute products sharing the same wastewater drainlines and networks potentially faced high plumbing bills. In addition, the cost of environmental harm can be enormous because these substitute products can cause irreversible destruction to marine life and habitat.

Questions

(Note: Questions must be answered in the context of this case)

1.1 Ceteris paribus, draw a demand curve and a supply curve in the short-run (i.e., March 2020 as described in this case) for toilet papers in Australia, showing clearly the elasticity of each curve on a diagram. Explain the reason behind the elasticity for these curves.