A widespread panic has ensued around the nation due to the new novel coronavirus. Supermarkets are running out of essentials as people rush to stock up on canned food, after disease experts recommend that Australians have food and essentials to last up to two weeks.
The panic has caused household essentials to become scarce in many stores. Woolworths and Coles have introduced a ‘one pack per transaction’ limit to attempt to control the hoarding, after selling out of their supply of toilet paper in less than an hour.
With the sudden rise of importance of toilet paper, companies are struggling to meet consumer demand. Toilet paper company Kleenex has increased its production to 24 hours a day to attempt to meet demand, as have many others. However, stores continue to rapidly sell out of essentials due to the excess demand, creating shortages, as the demand wildly outweighs the current supply. Coles has requested that companies focus on producing larger packs. Prices may also rise due to the increase in demand, shifting the equilibrium price higher.
Shareholders in Woolworths and Coles are benefiting heavily from this hysteria. Woolworths had a poor performance for the half year, with net profit dropping by 8%. However, were the buying to continue, experts see Woolworths to recover. Coles’ shares are increasing and analysts forecast this to continue, with a target share price of $17.80.
This panic buying could be an example of herd behaviour, as it’s likely that many consumers are seeing the massive panic over toilet paper and thinking ‘Wait, maybe I should also be stocking up?’. They hope that the panicked crowd knows more than them. Present bias is also a factor, as people are overstocking due to the current panic, and may find themselves with an oversupply of essentials in the future.
The disease experts also heavily influenced the consumers. Their suggestion that citizens should stock up on 2 weeks worth of supplies definitely had an effect on the consumers decisions, and was taken wildly out of hand. The advice was meant to be used in the case of a self quarantine for up to two weeks, yet consumers have started to prep for a doomsday situation, which makes essential goods scarce and out of reach for many who need it.
I think what Woolworths and Coles are doing is great, imposing limits on consumer purchases will help make essential supplies readily available for everyone, and will prevent consumers from being influenced by the present bias. How do you all feel about this issue? Should we be stocking up on toilet paper or should we keep living as usual?
Sources:
https://www.fool.com.au/2020/03/04/why-you-should-buy-asx-shares-instead-of-toilet-paper/
Year 11 MHS Economics 2020 
make sure to wash your hands! 🐱🐉😷
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Very insightful Max Lioudvigov! The impact of this virus is very interesting!
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Hi Max, I think a better title would be ‘Panic 4-ply’ as it’s more punny!
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Hi Max, I think a better title would be ‘Panic 4-ply’ as it’s more punny!
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Yes, I agree!
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Yes, I agree!
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Excellent unique article
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