EconExtra will be a series of posts that go beyond the textbook, relating current events and recent developments in economics to content standards, and providing resource suggestions to help you incorporate the current events into your lessons.

The Issue/Event

Is there anyone reading this post that did NOT have trouble finding toilet paper in the last six months, especially in the early days of the pandemic? This first post will cover supply and demand, focusing on the dynamics of markets during the challenging times of the pandemic. This material could be woven into coverage of CEE Content Standard 3 – Allocation, Content Standard 7 – Markets and Prices (specifically shortages), and Content Standard 8 – Role of Prices.

There are numerous examples of demand and supply issues that have probably impacted your students, and why not replace the textbook examples with things like toilet paper, hand sanitizer, bicycles, kiddie pools, pasta, flour, yeast, canned soup, meat, gasoline, airline tickets and hotel rooms? What other items have the students had trouble buying in the last six months? Each example can be categorized in terms of elastic or inelastic supply of the product, elastic or inelastic demand for the product, and whether the pandemic caused a supply shock, a demand shock, a combination, or something else entirely.  During the pandemic, supplies of goods have been impacted by situations for which prices can’t compensate. In many cases, demand shifted from commercial uses to consumers directly, like toilet paper. Consumers want a different quality of toilet paper that is also packaged differently, so production had to adjust, and restaurants asked in you wanted TP with you order!

Supply chains were disrupted. Factories were shut down or capacity limited due to health orders. In effect, the supply for many things became totally inelastic, at least in the short term. Shortages led to price gouging, but those higher prices may have gone to those who hoarded goods, and not necessarily to the manufacturers (it all happened so fast.) Some manufacturers responded and were able to switch their production from something with decreased demand to some of the goods in demand, like distilleries making hand sanitizer, and other manufacturers switching to PPE. But hotels couldn’t give rooms away, (they did, to health care workers not wanting to put their families at risk, but usually didn't charge) and people stopped flying.

Moving beyond supply and demand, the conversation could continue with a discussion of the allocation of these goods that suddenly became scarce. What happened? What different allocation methods might have made the distribution of the scarce goods more efficient and perhaps more equitable? PPE, testing supplies, and ventilators come to mind here, and perhaps a debate pitting market forces against government intervention.

And finally, what has happened to overall price levels during this time?

Step #1 Choose an appropriate video or podcast  from the list below for your students to watch/listen to.  

These first two videos are relatively short and entertaining.

• We the Economy: “Supply and Dance Man” is summarized as follows:

A whimsical tale of love, dance and the economic concept of supply and demand. Bored in class, Jonathan and Kristin aare woken up by our friendly narrator who helps guide them on an adventure in economics and…um…dance.

• Mr. Clifford (YouTube) discusses the elasticity of supply and demand.

Why don't gas stations have sales? I explain elasticity of demand and the difference between inelastic and elastic. I also cover the total revenue test and give you a little trick to remember it.

These next four are a little drier and more like textbook alternatives.

• Federal Reserve Economic Lowdown Series covers the basics of  Supply and Demand.
• Khan Academy (demand and supply) goes into the calculation of elasticity of each.

Two Cents Videos are 5-8 minutes long and pitched pretty well for students.

• Is Price Gouging Bad? Is actually an EdPuzzle (thanks NGPF!), and there are two newer ones that might be appropriate:
• Can the Food Service Industry Survive Coronavirus?
• How Smart Entrepreneurs Feel About Pricing

PBS Planet Money Summer School podcasts are very engaging, but I would suggest they are appropriate for older high school students (the title of Lesson Three may be a bit off-putting.) They are just under a half hour long, and end with an “assignment.”

Lesson Two – Markets & Pickles

• Supply and demand
• Local knowledge problem
• Gains from trade
• Information asymmetry
• Monopoly

Lesson Three – Profit & Cocaine

• Elastic demand
• Inelastic demand
• Drug legalization
• Barriers to entry

Step #2: Have students evaluate what exactly happened in terms of supply and/or demand for a couple of products impacted by the pandemic?  They can start their research with the article(s) listed below.  If you would like a worksheet on this topic to reference, check out this PBS lesson on supply and demand, complete with questions for students to answer. It asks students to apply what they know about supply and demand to historical situations. This might be a good framework for adding an example or two from the pandemic.

Toilet Paper

• The Financial Times has a great video on the Toilet Paper shortage!
• Here is USA Today article from April on the TP shortage.

Yeast/Flour/Sourdough craze!

• Business Insider describes what happened when everyone decided to make their own bread while stuck at home.

Packaging issues

• Slate explains how many product shortages were the a result of packaging shortages, not the products themselves.

Laptop Shortage

• With everyone working and learning from home, laptops were hard to find. (CNN)

PPE

• Supplies opened up for awhile, but apparently there are PPE shortages again. (WaPo)

Bicycles

• Marketplace describes what happens when lifestyles change abruptly at the same time as supply chains get disrupted.

Dumbbells

• USA Today has some suggestions for where to find them.

Airlines/Travel

• Airline ticket prices hit rock bottom in June. (Fox6Milwaukee)
• By August, all airlines dropped change fees on tickets. (Morning Brew)
• Airlines for America gave a presentation in September about the state of the airline industry. Here are the slides.
• Just how much did every means of travel change during the pandemic? (FRED)
• How are hotels dealing with the pandemic? Many are hurting. Those that remain must pivot. (MarketWatch)
• People are choosing AirB&B and VRBO over hotels. (USA Today)

Consumer Price Index

• The Cleveland Fed published median CPI data, but check out the “components” tab for a spreadsheet of different product annualized price increases. Check out Used Cars!
• CNBC summarizes August data.

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