Paper gold: could the price of toilet paper be about to skyrocket?

With growing concerns over the spread of the coronavirus in Australia, supermarkets and other retailers have been stockpiling supplies of toilet paper over fears that they may face a sudden shortage.

In response to the growing demand, toilet paper manufacturers have been ramping up production, with the largest producer in the country working 24 hours a day. Fears remain however, that even with manufacturers operating at full capacity, the shelves may empty faster than they can be replenished.

The predicted supply shortage is due to the coronavirus-induced spike in demand for not only toilet paper, but all kinds of everyday household items.

In the case of excess demand under normal free-market conditions, we would expect the market to correct itself by pushing up the price of toilet paper, squeezing some consumers out of the market, and thus reducing the pressure on supply. At least in the short-run though, prices are unlikely to be pushed up for such an everyday good, with the government likely to intervene if businesses tried to do so.

As long as fears of the coronavirus remain, markets for all sorts of products are going to be distorted, and governments around the world need to be ready to intervene quickly and efficiently to ensure that supply chains stay open and consumers still have access to daily necessities and foodstuffs.