The global spread of the Coronavirus led to a surge in demand for a number of goods including toilet paper, disinfectant wipes, and hand sanitizer. Many people worried about future availability began stockpiling supplies for their family. Others began stockpiling to profit off of expected future prices. Many states enacted anti price-gouging laws to prevent profiteering, but shortages persisted.
It is not unusual for shortages to arise in times of crisis. Hurricanes often lead to shortages of water, batteries, and fuel before they make landfall, and construction supplies, medical equipment, and generators after they make landfall. The previous outbreak of Swine Flu in 2008 led to a shortage of hand sanitizer, much like the one experienced during the Coronavirus outbreak. However, one major difference in the US between 2008 and 2020 is that the number of craft distilleries and craft breweries in the US has grown exponentially. At their heart, distilleries, breweries, and hand sanitizer companies produce the same basic product: alcohol. It’s what they do with the alcohol afterward that makes the difference. As a result, dozens of small distilleries and breweries have shifted production from liquor and beer to hand sanitizer.
Discussion Questions:
- Debate: Do price-gouging laws help or harm consumers?
- Explain how changes in supply and demand might lead distillers to switch production from hand sanitizer. Discuss in the context of both markets.
- Many hand sanitizer companies specialize in producing sanitizers with special aromatic fragrances. Similarly, many craft distilleries specialize in producing liquors with unique flavor profiles. Assume producing unique smells and different flavors require very different, highly-specialized skills. Based on this, would you expect the PPF illustrating the production of these two good to be flat or bow-shaped? Explain.
Sources: Pittsburg Post-Gazette “Us: Toilet paper shortage has heroes and goats” by David Templeton; USA Today “These 10 household essentials are selling out—here’s where you can still get them” by Courtney Campbell and Shayna Murphy; New York Times “He Has 17,700 Bottles of Hand Sanitizer and Nowhere to Sell Them” by Jack Nicas; Fox News “Michigan AG opens coronavirus price-gouging probe into seller of hand sanitizer” by Robert Gearty; The Palm Beach Post “Hurricane Dorian: Storm intensifies—and so do shortages of gas, water” by Jeff Ostrowski; The Takeout “A master list of all the booze companies making hand sanitizer” by Jacob Dean; Daily Beast “American Distillers Are Making Top-Shelf Hand Sanitizer” by Wayne Curtis.