Market of Ideas Blog


By Wayne Wendling, Ph.D.1

Consider the following:  An overflowing shopping cart full of toilet paper, paper toweling and probably hand sanitizer in a Costco parking lot.  Soon other photos appeared of empty shelves and stories of retailers placing limits on purchases of toilet paper, paper towels, hand sanitizers and other products.  The photographs were windows to how some people were thinking about the unknown impact of the coronavirus.  The shopping behavior was quickly labeled “panic buying” and “stockpiling” and denigrated.  A social psychologist at Cambridge University discussed “fear contagion” and noted the following:

“When people are stressed their reason is hampered, so they look at what other people are doing.  If others are stockpiling it leads you to engage in the same behavior …. People see photos of empty shelves and regardless of whether it’s rational it sends a signal to them that it’s the thing to do.”2

However, as an economist, given the specific aspects of the coronavirus pandemic, the behavior may have been very rational.  The coronavirus, and responses to it, generated at least three shocks to the market:

  1. Shifting work and education to the home for many;
  2. Introducing uncertainty regarding usual community movement and services; and
  3. Blurring traditional consumer markets and commercial markets – local supply chains.

We discuss demand in Introductory Microeconomics courses in several ways. 

  1. We address the demand curve and the factors that lead to shifts in the demand curve for normal goods. 3
    • Change in income;
    • Change in prices of other goods;
    • Change in tastes;
    • Change in expectations; and
    • Change in number of buyers.
  2. We also discuss the relationship between prices and quantity demanded.  As prices decline, quantity demanded increases, holding other factors constant.

From my perspective, the determinants of the demand curve are more important for an analysis of buying behavior during the early stages of the coronavirus pandemic than is price.

“If you’re the first out the door, that’s not called panicking.” 

-Jeremy Irons to Kevin Spacey in Margin Call, the 2011 film.

  • Assume the shopper is part of a family of four, two adults and two college students.  Both adults are employed outside the home and both students attend school full-time away from home. 
  • Assume the shopper has just been informed that both adults in the family will be working remotely from home until further notice and that both student’s colleges have switched to online classes for the remainder of the term and all dorms are closed.
  • Assume that during a typical day, the adults had spent eight hours away at work and that total waking hours per day are 16. They will now be spending 16 waking hours per day at home.
  • Assume that each student returning home from college also will be spending 16 hours per day awake at home (not necessarily the same hours as the adults). 

Shift in Demand – the Number of Buyers (Shifting work and education to the home for many)

A Full House

Determinants of Demand and Markets

Let’s return to customer leaving Costco and consider one possible explanation for the filled shopping cart. 

Please see the table below in which the shopper’s buying for “at home waking time” is compared pre-pandemic to pandemic.  We can refer to the pre-pandemic time as D1 and pandemic time as D2.  The shopper’s demand curve now must account for four-times the amount of at-home waking hours.  Within this specific market, the shopper is now the equivalent of four buyers and the demand curve (D2) has shifted upward and to the right. 

IndividualPre-Pandemic Waking Hours at Home – D1Pandemic Waking Hours at Home – D2
Adult 1816
Adult 2816
College Student 1016
College Student 2016
Total 11664

As we input these factors, I ask: Is this panic buying?  Is this stockpiling?  It could be very rational behavior on the part of this shopper, and who had the good fortune of being one of the first through the door.

Embracing an Uncertain Future

Shift in Demand – Uncertainty, Risk and Expectations (Introducing uncertainty regarding usual community movement and services)

Economists distinguish between uncertainty and risk.  Risk can be quantified whereas uncertainty cannot yet be quantified.  Irrespective, uncertainty and/or risk can impact expectations one of the determinants of the demand.  So much was unknown during the early days of the virus – How was it transmitted?  Who was at risk?  How long would the Shutdown Last?  How frequently could a Person Leave Home?  What Stores would be Open?  Would Stores have supplies?

Is it panicking for consumers to adjust Expectations and therefore, their demand curves when there is greater uncertainty?  In the short run it is very reasonable for consumers to adjust Expectations and therefore, demand curves to shift upward and to the right to account for uncertainty.  As the consumer has adjusted to the risks of corona virus and its effect on their lives, consumer behavior changes again.

Some commentators would recommend raising prices to reduce “panicking purchases”.  Generally raising prices during events such as hurricanes or other natural disasters is viewed as “unfair” and carries long term reputational consequences.   The market has multiple layers for suppliers to consider.

In Closing

The coronavirus pandemic may impact the United States economy for years.  In the near term, it offers an interesting opportunity to assess consumer behavior as the virus introduced these shocks.  Were consumers panicking or responding rationally?  Research to find the answer will take time.  The short and medium future of our economy could be determined by the same factors as consumers determine the level of risk in eating at a restaurant or taking a vacation.

1 Wayne Wendling is a Senior Lecturer in the Business School at Carroll University where he teaches courses in economics, risk management and quantitative decision making.  Statements of facts or opinions are those of the author and do not necessarily represent the opinions or positions of Carroll University, its Business School nor the EconomicsWisconsin.

2 “Here is why people are panic buying and stockpiling toilet paper to cope with coronavirus fears”, by Chloe Taylor, March 11, 2020, CNBC (transcript of video).

3 Please see N. Gregory Mankiw, Principles of Microeconomics, (Eighth Edition), pp 67 – 71.