The Tail of Two Toilets

ECON2120G-M02 — Principles of Microeconomics

Dr. Meghan Downes

2026-02-25

Class Information

Important

ECON2120G-M02 — Principles of Microeconomics Class #10 | February 25, 2026 Topic: The Tail of Two Toilets — Complements, Substitutes, and Elasticity Textbook: Modern Principles: Microeconomics, 6th Edition — Tyler Cowen & Alex Tabarrok (Macmillan, 2024) Chapter Focus: Ch. 5 “Elasticity and Its Applications” SLO: SLO-09 — The student will apply supply and demand analysis to labor and other factor markets.

The Crimson Barnacle Lands in 2020

The Crimson Barnacle shudders through the time vortex. Navigator Socks “the GOAT” clings to his tiny orange life-vest as the ship lurches sideways. First Mate Orpheus drops his lute. The viewscreen clears to reveal… a Costco parking lot.

Captain Pirate Pete: “Orpheus, where are we?”

Orpheus: (checking the temporal dial) “March 2020. Las Cruces, New Mexico. Earth.”

Socks: “Cap’n… why are those people fighting over… paper?”

Below, two masked humans wrestle over a 12-pack of Charmin Ultra Soft. A third sprints past with a shopping cart stacked six feet high with toilet paper. Security guards look on helplessly.

Pete: “By the Seven Seas. What is this madness?”

Orpheus: (scanning with the ship’s knowledge banks) “It appears to be something called ‘The Great Toilet Paper Shortage of 2020.’ A global pandemic has caused mass panic. Humans are… hoarding toilet paper.”

Socks: (adjusting his tiny orange life-vest) “But why toilet paper? Not food? Not medicine? Not weapons?”

Pete: “That, Socks, is exactly the right question. And the answer — as always — is economics. Complements, substitutes, and elasticity. Let us investigate.”

Socks: “Is this going to be like the Hypno-Hippo situation?”

Pete: “Worse. The Hypno-Hippo just stole their attention. This pandemic has disrupted their entire supply chain. And it all starts with one truth bomb…”

Orpheus: “Which is?”

Pete: “Everywhere a human goes, a toilet is sure to follow. And it stinks.”

Part 1: Complements — Everywhere a Human Goes

A Truth Bomb

Here is something no other professor is likely to tell you, but it is a truth of the world:

Note

“Everywhere a human goes, a toilet is sure to follow.”

There is no more truth in the world than this. This is a truth bomb. And it stinks.

This statement is a bridge to our first key economic concept: complements.

Note

Definition — Complements Two goods are complements when they are always used together. The presence of one significantly increases the value of the other. Source: Cowen and Tabarrok (2024), Ch. 5: “Elasticity and Its Applications.”

Consider the toilet and toilet paper. Just as humans and toilets are complements — everywhere a human goes, a toilet is sure to follow — everywhere you have a toilet, you are much happier when there is toilet paper. They are two things you always use together. That is the definition of a complement.

Socks: “So humans and toilets are complements. And toilets and toilet paper are complements. That is why the shortage is so terrifying — you cannot have one without the other.”

Pete: “Precisely. And when 330 million humans suddenly moved from public spaces to their private homes, the toilet paper had to follow. But here is where it gets interesting — because not all toilet paper is the same…”

Orpheus: (strumming a minor chord) “A tale of two toilets.”

Pete: “Exactly.”

Part 2: Substitutes — The Great Toilet Paper Shortage of 2020

March 2020: When Life Got Crazy

Close your eyes for a moment. Put yourself in December 2019. Life is good. Christmas break. Maybe you’re in middle school. Life is rocking. Now fast-forward to March 2020. What has changed? What is happening in your family? Do you have loved ones who are essential workers? How are you doing psychologically?

It was Fight Club in the grocery stores. And the thing everyone remembers — more than the masks, the hand sanitizer, the fear — is The Great Toilet Paper Shortage of 2020.

People were paying $125 for a six-pack of toilet paper on Amazon. Garages were full of hoarded rolls. What on earth was going on?

The Two Toilets

Here is the key insight, and this is what makes the Tale of Two Toilets unique:

Important

The Key Insight What consumers broadly think of as “toilet paper” is actually two completely different products with two completely separate supply chains:

  1. Commercial toilet paper — cheap, scratchy, thin, giant rolls, no fancy wrapping. The stuff in your campus restroom, the gas station at 2 AM, the Starbucks bathroom.
  2. Consumer toilet paper — soft, quilted, small rolls, Charmin, Quilted Northern, easy-tear edges (someone spent two years of their life designing that).

These two products use different wood pulp, different chemicals, different machines, different packaging, different shipping infrastructure. They are entirely different supply chains.

During the pandemic, a massive population shift happened. Everyone went home. Offices emptied. Schools closed. Restaurants shut down. Wherever the humans went, the toilets followed — and so did the demand for toilet paper.

  • Commercial toilet paper: Demand collapsed. Warehouses sat full of giant scratchy rolls that nobody wanted.
  • Consumer toilet paper: Demand exploded. Supply chains couldn’t keep up.

Because the production processes are entirely different, you cannot simply redirect commercial supply to meet consumer demand. The machinery is different. The packaging is different. The distribution channels are different. Thank you, specialization, division of labor, and trade — we got easy-tear toilet paper, but we also got supply chains that can’t pivot overnight.

Note

Definition — Substitutes Two goods are substitutes when an increase in the price of one leads to an increase in the demand for the other. Consumers can switch between them. Source: Cowen and Tabarrok (2024), Ch. 5.

Commercial and consumer toilet paper are broadly substitutes — they accomplish the same function. But the 2020 shortage revealed that they are imperfect substitutes. Nobody actually wanted the commercial stuff. The substitution was one-directional and incomplete. That fundamental market disconnect, compounded by consumer panic and hoarding, was the true cause of the shortage.

Orpheus: “So the humans think commercial and consumer toilet paper are interchangeable, but they are not.”

Socks: “It is like if someone told us that the Crimson Barnacle’s navigational charts and a children’s treasure map were the same thing because they are both on paper.”

Pete: “Same broad category. Completely different product. Completely different supply chain. And 330 million people found that out the hard way.”

Part 3: Elasticity — How Stretchy Is Demand?

The Concept

Now we introduce the term that ties everything together: elasticity.

Note

Definition — Price Elasticity of Demand Price elasticity of demand measures how responsive the quantity demanded of a good is to a change in its price. In plain language: how stretchy is demand?

\[E_d = \frac{\% \Delta Q_d}{\% \Delta P}\]

  • If \(|E_d| > 1\): demand is elastic (stretchy — big quantity response to price change)
  • If \(|E_d| < 1\): demand is inelastic (stiff — small quantity response to price change)
  • If \(|E_d| = 1\): demand is unit elastic

Source: Cowen and Tabarrok (2024), Ch. 5: “Elasticity and Its Applications.”

Socks: “So if the price of grog goes up 10% and we buy half as much, that is elastic?”

Pete: “Very elastic. But if the price of cannon powder goes up and we pay it anyway because we are in the middle of a sea battle — that is inelastic. The question is always: does the buyer have a good alternative?”

Part 4: Elastic Goods — Corn, Beef, Chicken, and Pork

Commodity Goods and Price Sensitivity

Consider corn. Is one corn cob really that different from the next corn cob? Not really. When goods are largely interchangeable — what economists call commodity goods — consumers are extremely price-sensitive.

Stand at the grocery store. Two bags of corn tortilla chips. They taste about the same. One is $5, the other is $7. Which do you choose? The $5 bag. Every time. That is elastic demand in action.

The Meat Market: Substitution at Work

Now consider what is happening right now in the meat market:

Table 1: Table 1: Current Meat Prices and Consumer Substitution Patterns (Spring 2026, illustrative)
Protein Approx. Price per Pound Demand Response Elasticity
Ground Beef $8–10 Consumption falling sharply Elastic
Chuck Steak $15–20 Only affordable for higher incomes Elastic
Bison (Sprouts) $7–9 Cheaper than beef — unusual Elastic
Chicken $3–4 Demand rising as beef substitute Elastic (substitute)
Pork $1.10 Cheapest option — demand growing Elastic (substitute)
Market trend:
Beef prices approaching $8–10/lb for ground and $20/lb for steak have driven significant substitution toward chicken, pork, and plant-based alternatives.

At Sam’s Club, a pack of two steaks can run $50. We are pushing $20 a pound for chuck steak. That’s crazy. So what happens? Families — including mine — have significantly reduced beef consumption and substituted with chicken. Some are even considering pork at $1.10 a pound, a third the price of chicken.

And beyond meat? Portobello mushrooms. Beans. Lentils (if you’re braver than I am). The point: for elastic goods, a price increase leads to a significant decrease in quantity demanded because consumers switch to substitutes.

Show R code 
# ── Elastic demand curve illustration ─────────────────────────────────────────
# Show how a small price change causes a large quantity change

demand_elastic <- tibble(
  Q = seq(10, 90, length.out = 200),
  P = 12 - 0.08 * Q  # relatively flat = elastic
)

ggplot(demand_elastic, aes(x = Q, y = P)) +
  geom_line(color = pal$teal, linewidth = 1.3) +
  # Price change annotation
  annotate("segment", x = 0, xend = 40, y = 8.8, yend = 8.8,
           linetype = "dotted", color = pal$coral, linewidth = 0.7) +
  annotate("segment", x = 0, xend = 65, y = 6.8, yend = 6.8,
           linetype = "dotted", color = pal$coral, linewidth = 0.7) +
  annotate("segment", x = 40, xend = 40, y = 0, yend = 8.8,
           linetype = "dotted", color = pal$coral, linewidth = 0.7) +
  annotate("segment", x = 65, xend = 65, y = 0, yend = 6.8,
           linetype = "dotted", color = pal$coral, linewidth = 0.7) +
  # Points
  annotate("point", x = 40, y = 8.8, size = 4, color = pal$navy) +
  annotate("point", x = 65, y = 6.8, size = 4, color = pal$navy) +
  # Labels
  annotate("text", x = 42, y = 9.3, label = "A: Beef at $10/lb",
           color = pal$navy, size = 3.5, hjust = 0, fontface = "bold") +
  annotate("text", x = 67, y = 7.3, label = "B: Switch to chicken at $4/lb",
           color = pal$navy, size = 3.5, hjust = 0, fontface = "bold") +
  # Arrows showing the change
  annotate("text", x = 3, y = 7.8, label = "Small Δ Price",
           color = pal$slate, size = 3, angle = 90) +
  annotate("text", x = 52, y = 0.8, label = "Large Δ Quantity",
           color = pal$slate, size = 3) +
  labs(
    title = "Elastic Demand: Meat Market",
    subtitle = "A modest price change causes a large shift in quantity demanded — consumers substitute",
    x = "Quantity Demanded",
    y = "Price ($/lb)",
    caption = data_source_note
  ) +
  scale_x_continuous(limits = c(0, 95), expand = c(0, 0)) +
  scale_y_continuous(limits = c(0, 12), expand = c(0, 0)) +
  theme_minimal(base_size = 14) +
  theme(
    plot.title    = element_text(face = "bold", color = "#1B2A4A"),
    plot.subtitle = element_text(color = "#5C6B7A"),
    plot.caption  = element_text(color = "#A0A8B0", size = 9)
  )
Figure 1: Illustrative data. Lecture material for ECON2120G-M02, Class #10 (2026-02-25). Based on Cowen & Tabarrok, Modern Principles: Microeconomics, 6th ed. (Macmillan, 2024), Ch. 5.

Pete: “This is the lesson of elastic goods. When the price rises, consumers do not sit still. They substitute. Beef to chicken to pork to mushrooms to beans. The demand curve is flat — stretchy — because alternatives exist.”

Socks: (taking notes on a scrap of parchment) “So the Hypno-Hippo’s brain-rot was free, which is why everyone consumed so much. But these food goods have real prices that people respond to.”

Pete: “Exactly. Now let me tell you about things where there are no alternatives. And where the price barely matters at all.”

Part 5: Inelastic Goods — Coffee, Heroin, Insulin, and Tiger Eyeballs

Caffeine: It’s a Cold Day in Hell

What happens if coffee prices triple overnight? For most people, that would matter. But for those of us deep down the caffeine addiction path?

I would give up most everything in my life to be able to have coffee. It is a cold day in hell before I will go without my caffeine. I discovered this with my first pregnancy, when they said no caffeine starting on day one. The worst month of my life. I am never doing that again.

Caffeine has few substitutes (tea, energy drinks, yaupon — whose scientific name translates to “vomit bush”). And for the truly addicted, none of them are real substitutes. That makes demand inelastic: a big price change produces only a small quantity change.

Heroin, Nicotine, Alcohol

The same logic applies to addictive substances more broadly. For alcohol, marijuana, cigarettes — there is a habit that becomes really powerful. The reward centers in our brains get wired around these substances. If prices triple, consumption barely budges for the addicted. The demand curve is steep — nearly vertical.

Insulin: Life or Death

Important

The Most Powerful Example of Inelastic Demand

Imagine you are diabetic. One month, your insulin costs $200. The next month, someone bought the patent and the price is now $1,000. Are you going to pay it?

You will die if you don’t have it.

Your choice is literally life or death. You will sell plasma, take on debt, sacrifice everything — because you have no substitute and no choice. Demand is almost perfectly inelastic: the price can rise enormously with almost no change in quantity demanded.

This is not abstract theory. People have died because they could not afford their insulin and chose to pay rent instead. Those are terrible choices. But that is economics when demand is perfectly inelastic.

Tiger Eyeballs: Scarcity and the Black Market

Tyger Tyger, burning bright, In the forests of the night; What immortal hand or eye, Could frame thy fearful symmetry?(Blake 1794)

There are only an estimated 700 to 750 wild tigers left in the world.(World Wildlife Fund 2025) Tigers are among the most poached animals on earth. In some traditional medicines, tiger eyeballs, whiskers, and hearts have tremendous value on the black market. The demand is highly inelastic — if you believe it will save the person you love most, you will pay whatever price is asked.

And the poachers? It is easy to hate them. But many live in countries where the poverty is so deep that killing a tiger and selling its parts could feed a family for a lifetime. It is the insulin choice again: a life-or-death economic calculation born of desperation.

The more scarce tigers become, the more valuable their parts become, and the stronger the financial incentive to poach. Scarcity feeds inelasticity feeds tragedy. This is economics at its most brutal.

Table 2: Table 2: The Elasticity Spectrum — From Corn Chips to Tiger Eyeballs
Good Key Characteristic Elasticity Why?
Corn tortilla chips Interchangeable commodity Highly elastic Many alternatives → very price-sensitive
Beef → Chicken → Pork Multiple protein substitutes available Elastic Can switch proteins as prices change
Coffee / Caffeine Addictive; few true substitutes Inelastic Addiction reduces willingness to substitute
Heroin / Nicotine Highly addictive; withdrawal severe Highly inelastic Physiological dependence overrides price signals
Insulin Life-sustaining necessity; zero substitutes Almost perfectly inelastic No substitute; alternative is death
Tiger parts (black market) Perceived necessity; extreme scarcity Highly inelastic No substitute in believer's mind; scarcity drives price
Key determinants:
Elasticity depends on: availability of substitutes, necessity vs. luxury, addiction, time horizon, and share of budget.

Part 6: Graphical Analysis — Two Markets, Two Stories

Bringing It All Together

Now we return to the Tale of Two Toilets and show the economics graphically. Remember: “toilet paper” is really two separate markets. We need two supply and demand graphs.

Show R code 
# ══════════════════════════════════════════════════════════════════════════════
# TWO-MARKET ANALYSIS: Public vs. Private Toilet Paper
# ══════════════════════════════════════════════════════════════════════════════

# ── Supply curve (same for both markets, fixed) ──────────────────────────────
supply_fn <- function(Q) 1 + 0.08 * Q

# ── Market 1: Public Toilet Paper ────────────────────────────────────────────
# Demand falls (leftward shift)
d_public_pre  <- function(Q) 10 - 0.06 * Q
d_public_post <- function(Q) 6  - 0.06 * Q

# Equilibrium pre:  1 + 0.08Q = 10 - 0.06Q → 0.14Q = 9 → Q ≈ 64.3, P ≈ 6.14
# Equilibrium post: 1 + 0.08Q = 6  - 0.06Q → 0.14Q = 5 → Q ≈ 35.7, P ≈ 3.86

q_seq <- seq(0, 100, length.out = 300)

public_df <- bind_rows(
  tibble(Q = q_seq, P = supply_fn(q_seq), curve = "Supply", market = "Public Toilet Paper"),
  tibble(Q = q_seq, P = d_public_pre(q_seq), curve = "D (Pre-Pandemic)", market = "Public Toilet Paper"),
  tibble(Q = q_seq, P = d_public_post(q_seq), curve = "D (Pandemic)", market = "Public Toilet Paper")
) |> filter(P >= 0 & P <= 12)

public_points <- tibble(
  Q = c(64.3, 35.7),
  P = c(6.14, 3.86),
  label = c("A", "B"),
  market = "Public Toilet Paper"
)

# ── Market 2: Private Toilet Paper ───────────────────────────────────────────
# Demand rises (rightward shift)
d_private_pre  <- function(Q) 8  - 0.06 * Q
d_private_post <- function(Q) 12 - 0.06 * Q

# Equilibrium pre:  1 + 0.08Q = 8  - 0.06Q → 0.14Q = 7 → Q = 50, P = 5
# Equilibrium post: 1 + 0.08Q = 12 - 0.06Q → 0.14Q = 11 → Q ≈ 78.6, P ≈ 7.29

private_df <- bind_rows(
  tibble(Q = q_seq, P = supply_fn(q_seq), curve = "Supply", market = "Private Toilet Paper"),
  tibble(Q = q_seq, P = d_private_pre(q_seq), curve = "D (Pre-Pandemic)", market = "Private Toilet Paper"),
  tibble(Q = q_seq, P = d_private_post(q_seq), curve = "D (Pandemic)", market = "Private Toilet Paper")
) |> filter(P >= 0 & P <= 12)

private_points <- tibble(
  Q = c(50, 78.6),
  P = c(5, 7.29),
  label = c("C", "D"),
  market = "Private Toilet Paper"
)

# ── Combine ──────────────────────────────────────────────────────────────────
all_curves <- bind_rows(public_df, private_df)
all_points <- bind_rows(public_points, private_points)

ggplot(all_curves, aes(x = Q, y = P, color = curve, linetype = curve)) +
  geom_line(linewidth = 1.1) +
  geom_point(data = all_points, aes(x = Q, y = P),
             inherit.aes = FALSE, size = 4, color = pal$navy) +
  geom_text(data = all_points, aes(x = Q + 3, y = P + 0.4, label = label),
            inherit.aes = FALSE, fontface = "bold", color = pal$navy, size = 4.5) +
  # Arrows showing direction of change
  geom_segment(
    data = tibble(
      x = c(64.3, 50), xend = c(35.7, 78.6),
      y = c(6.14, 5), yend = c(3.86, 7.29),
      market = c("Public Toilet Paper", "Private Toilet Paper")
    ),
    aes(x = x, xend = xend, y = y, yend = yend),
    inherit.aes = FALSE,
    arrow = arrow(length = unit(0.2, "cm")),
    color = pal$coral, linewidth = 0.9
  ) +
  facet_wrap(~ market, scales = "free_x") +
  scale_color_manual(
    values = c(
      "Supply"           = pal$teal,
      "D (Pre-Pandemic)" = pal$slate,
      "D (Pandemic)"     = pal$coral
    )
  ) +
  scale_linetype_manual(
    values = c(
      "Supply"           = "solid",
      "D (Pre-Pandemic)" = "dashed",
      "D (Pandemic)"     = "solid"
    )
  ) +
  labs(
    title    = "The Tale of Two Toilets — Two Markets, Two Outcomes",
    subtitle = "Public TP demand collapses (A→B); Private TP demand surges (C→D)",
    x        = "Quantity",
    y        = "Price",
    color    = "",
    linetype = "",
    caption  = data_source_note
  ) +
  theme_minimal(base_size = 13) +
  theme(
    plot.title      = element_text(face = "bold", color = "#1B2A4A"),
    plot.subtitle   = element_text(color = "#5C6B7A"),
    plot.caption    = element_text(color = "#A0A8B0", size = 9),
    legend.position = "bottom",
    strip.text      = element_text(face = "bold", size = 12, color = "#1B2A4A")
  )
Figure 2: Illustrative data. Lecture material for ECON2120G-M02, Class #10 (2026-02-25). Based on Cowen & Tabarrok, Modern Principles: Microeconomics, 6th ed. (Macmillan, 2024), Ch. 5.

Reading the Graphs

Market for Public Toilet Paper (Left Panel)

The pandemic happens. People stay home. Fewer people need the public restroom. Demand for commercial toilet paper falls — a leftward shift from the pre-pandemic demand curve to the pandemic demand curve. With supply unchanged, we move from point A to point B:

  • Price falls (warehouses full of product nobody wants)
  • Quantity falls (less sold)
  • This is a change in demand (the curve shifts) caused by a change in tastes and preferences (the pandemic mandates)

Market for Private Toilet Paper (Right Panel)

Wherever the humans went, the toilets followed. People are home all day, every day. Demand for consumer toilet paper surges — a rightward shift. With supply fixed (remember, those supply chains cannot pivot), we move from point C to point D:

  • Price rises (some paying $125 for a six-pack)
  • Quantity rises (whatever is available gets snapped up)
  • This is a change in demand caused by the same determinant: change in tastes and preferences
Important

The Punchline The Great Toilet Paper Shortage of 2020 was not irrational mass hysteria. It was the predictable result of a sudden, massive shift in demand between two related but non-substitutable markets with entirely separate supply chains. The economics explains it perfectly.

Part 7: The Mission Debrief

The Crimson Barnacle’s conference room. Captain Pete has drawn the two-panel diagram on the holographic whiteboard. The crew stares at the Costco parking lot below, where the fighting has subsided into resigned queuing.

Socks: (slowly) “So let me put this all together. The toilet paper shortage was not irrational panic. It was two separate markets — public and private — with completely different supply chains. When 330 million humans moved from one market to the other overnight, supply could not follow.”

Pete: “Correct. Complements, substitutes, and elasticity — three concepts that explain the whole fiasco.”

Orpheus: “And the broader lesson?”

Pete: “Elasticity tells you everything about how markets respond to shocks. Elastic goods — like beef, like corn chips — see big quantity swings when prices move, because substitutes exist. Inelastic goods — like insulin, like caffeine, like tiger parts — barely budge, because there is no alternative.”

Socks: “And the Hypno-Hippo?”

Pete: “The Hypno-Hippo understood this instinctively. It made brain-rot content free and ensured there were no perceived substitutes. Zero price, no alternatives — that is how you get infinite scrolling. The pandemic toilet paper shortage is the same principle in reverse: when a complement vanishes and substitution is imperfect, prices spike and panic follows.”

Orpheus: (strumming thoughtfully) “So whether we are fighting a holographic hippo or a virus, the economics is the same: understand complements, substitutes, and elasticity, and you understand the market.”

Pete: “Now you are thinking like economists. Set course for the next time period, Socks. There are more markets to save.”

Socks: (adjusting his tiny orange life-vest, grinning) “Aye aye, Cap’n. But first — can we stop and buy some toilet paper? Just in case?”

Key Concepts Summary

Table 3: Table 3: Key Concepts — The Tail of Two Toilets
Concept Definition Lecture Example
Complements Two goods consumed together; one increases the value of the other Toilet + toilet paper; humans + toilets; tacos + salsa
Substitutes Two goods where an increase in the price of one raises demand for the other Commercial vs. consumer TP; beef → chicken → pork
Price Elasticity of Demand Responsiveness of quantity demanded to a change in price: %ΔQd / %ΔP The 'stretchiness' of demand
Elastic Demand (|Ed| > 1) Demand is highly responsive to price — consumers switch to alternatives Beef, corn chips, generic commodities
Inelastic Demand (|Ed| < 1) Demand is unresponsive to price — consumers have few alternatives Coffee, insulin, heroin, tiger parts
Determinants of Elasticity Availability of substitutes, necessity vs. luxury, addiction, time horizon, budget share Why insulin is inelastic and corn chips are elastic

Check Yourself

Important

Instructions Five problems below. Work through each before expanding the answer. These range from classify → calculate → apply. Several connect back to the toilet paper, space pirate, and tiger examples.

Problem 1 — Classify: Complements or Substitutes?

For each pair, identify whether the goods are complements, substitutes, or neither. Explain your reasoning.

a. Peanut butter and jelly b. Coca-Cola and Pepsi c. Gas and cars d. Commercial toilet paper and consumer toilet paper e. The Crimson Barnacle’s cannon powder and cannonballs

a. Complements. PB&J are consumed together; demand for one rises with the other.

b. Substitutes. Largely interchangeable. If Pepsi’s price rises, Coke demand rises.

c. Complements. Cars need gas to run; a rise in gas prices can reduce car usage.

d. Substitutes — but imperfect ones. They serve the same function but have completely different supply chains, quality characteristics, and consumer preferences. The 2020 shortage proved they are not easily interchangeable.

e. Complements. Cannon powder without cannonballs is useless, and vice versa. You need both to fire the cannons. A rise in the price of cannonballs reduces the value of cannon powder.

Problem 2 — Calculate: Elasticity of Demand

A street vendor near the Costco parking lot sells face masks at $3.00 each and moves 200 per day. She raises the price to $3.50 and sells only 140.

a. Calculate the price elasticity of demand using the midpoint formula. b. Is demand elastic, inelastic, or unit elastic? c. What happened to the vendor’s total revenue? Does this make sense given your elasticity answer?

a. Midpoint formula:

\[E_d = \frac{(Q_2 - Q_1) / [(Q_2 + Q_1)/2]}{(P_2 - P_1) / [(P_2 + P_1)/2]}\]

\[E_d = \frac{(140 - 200) / [(140 + 200)/2]}{(3.50 - 3.00) / [(3.50 + 3.00)/2]} = \frac{-60/170}{0.50/3.25} = \frac{-0.353}{0.154} = -2.29\]

b. \(|E_d| = 2.29 > 1\), so demand is elastic.

c. Revenue before: \(200 \times \$3.00 = \$600\). Revenue after: \(140 \times \$3.50 = \$490\). Revenue fell by $110. This is consistent with elastic demand: when demand is elastic, a price increase causes revenue to decrease because the quantity drop is proportionally larger than the price increase.

Problem 3 — Apply: The Insulin Problem

A pharmaceutical company raises the price of insulin from $200/month to $500/month. Quantity demanded falls from 10,000 units to 9,800 units.

a. Calculate the price elasticity of demand. b. Why is this demand so inelastic? c. What does this mean for the company’s total revenue? d. Is this ethical? Discuss using the concepts from this lecture.

a. \[E_d = \frac{(9800 - 10000)/9900}{(500 - 200)/350} = \frac{-0.0202}{0.857} = -0.024\]

\(|E_d| = 0.024\) — demand is almost perfectly inelastic.

b. Insulin has zero substitutes for Type 1 diabetics. The alternative to buying insulin is death. There is no good the consumer can switch to, no matter how high the price rises.

c. Revenue before: \(10{,}000 \times \$200 = \$2{,}000{,}000\). Revenue after: \(9{,}800 \times \$500 = \$4{,}900{,}000\). Revenue more than doubled. When demand is inelastic, a price increase raises total revenue because quantity barely falls.

d. This is where economics meets ethics. The mechanism is clear: inelastic demand gives the seller enormous pricing power. But the consequence — people dying because they cannot afford a life-saving necessity — raises profound moral questions about whether markets alone can allocate goods when demand is driven by biological necessity rather than preference.

Problem 4 — Apply: Two Markets for Toilet Paper

Before the pandemic, the commercial TP market had equilibrium P = $6, Q = 65 (million rolls). During the pandemic, demand shifted left so that P = $4, Q = 36.

The private TP market had equilibrium P = $5, Q = 50 (million rolls). During the pandemic, demand shifted right so that P = $7, Q = 79.

a. In which market did a change in demand occur? In which did a change in quantity supplied occur? b. What was the determinant of demand that caused the shift? c. Why couldn’t commercial TP producers simply switch to making consumer TP?

a. Both markets experienced a change in demand (the demand curve shifted). In both markets, the supply curve stayed fixed, so what occurred on the supply side was a change in quantity supplied — movement along the existing supply curve to the new equilibrium.

b. The determinant was a change in tastes and preferences driven by pandemic lockdowns and mandates. People’s location shifted from public spaces to private homes, changing where they needed toilet paper.

c. The two products use entirely different production processes: different wood pulp, different chemicals, different machinery, different packaging, and different distribution channels. Specialization and division of labor make modern supply chains extraordinarily efficient — but not flexible. You cannot retool a factory that makes giant scratchy institutional rolls to produce soft quilted consumer rolls overnight (or even in months).

Problem 5 — Integrate: The Captain’s Supply Run

Captain Pete needs to resupply the Crimson Barnacle at a 2020 Earth port. He needs three items: generic rope ($3/coil, available everywhere), fresh drinking water ($2/gallon, multiple sources), and a specialized temporal navigation crystal ($600, sold by exactly one dealer).

a. Rank these three items from most elastic to most inelastic. Justify your ranking. b. Based on your ranking, for which item does Pete have the least bargaining power on price? The most? c. Orpheus says: “The elasticity of demand is the most important number in any market.” Explain what he means.

a. 1. Generic rope — most elastic. Available at every port, hardware store, and dock. Many substitutes. Highly price-sensitive. 2. Fresh drinking water — moderately elastic. Multiple sources exist, but it is a necessity. Some price sensitivity, but less willingness to go without. 3. Temporal navigation crystal — most inelastic. Only one dealer. No substitute exists. The Crimson Barnacle cannot time-travel without it.

b. Pete has the least bargaining power on the temporal navigation crystal — the dealer knows Pete has no alternative and can charge almost anything. Pete has the most bargaining power on rope — he can walk to the next vendor if the price is too high.

c. Elasticity tells you who has power in a transaction. If demand is elastic, the buyer has power — they can walk away. If demand is inelastic, the seller has power — the buyer has no alternative. Every pricing decision, every negotiation, every market outcome depends on understanding how responsive the other party is to price changes. From tacos to insulin to temporal navigation crystals, elasticity is the number that explains everything.

Slide Outline

Note

Slide Outline — “The Tail of Two Toilets” — Class #10, ECON2120G-M02 Suggested 12–14 slides for in-class presentation. Times approximate.

Slide 1 — Title Slide (1 min) - “The Tail of Two Toilets” - ECON2120G-M02 | Class #10 | Feb 25, 2026 - Dr. Meghan Downes - Mascots: Derpy Cat (K-Pop Demon Hunters) + Ninja Toilet Paper Roll

Slide 2 — The Crimson Barnacle Lands in 2020 (3 min) - Space pirates time-travel to a Costco parking lot, March 2020 - Humans fighting over toilet paper - “By the Seven Seas. What is this madness?” - Preview: complements, substitutes, elasticity

Slide 3 — Close Your Eyes: March 2020 (4 min) - Interactive moment: students close eyes, recall Dec 2019 → March 2020 - Discussion: essential workers, remote school, fear - “It was Fight Club in the grocery stores” - The Great Toilet Paper Shortage of 2020

Slide 4 — The Two Toilets (5 min) - Public toilet paper vs. private toilet paper - Different products, different supply chains - “Someone spent two years designing easy-tear edges” - Introduce substitutes — imperfect substitution

Slide 5 — Elasticity Defined (3 min) - “How stretchy is demand?” - Formula: \(E_d = \%\Delta Q_d / \%\Delta P\) - Elastic vs. inelastic spectrum

Slide 6 — Elastic Goods: The Meat Market (5 min) - Beef at $8–10/lb, steak at $20/lb - Substitution: beef → chicken → pork ($1.10/lb) - Portobello mushrooms, beans, lentils - Table 1: current meat prices

Slide 7 — Inelastic: Caffeine Addiction (3 min) - “It is a cold day in hell before I go without coffee” - First pregnancy: no caffeine for a month - Yaupon: the “vomit bush” substitute

Slide 8 — Inelastic: Heroin and Addiction (2 min) - AI-generated syringe image (“ridiculous and stupid in every way”) - Addictive substances: heroin, nicotine, alcohol - Price triples → consumption barely changes

Slide 9 — Inelastic: Insulin (Life or Death) (3 min) - $200/month → $1,000/month - “You’ll die if you don’t have it” - Almost perfectly inelastic demand

Slide 10 — Inelastic: Tiger Eyeballs (4 min) - William Blake: “Tyger Tyger, burning bright…” - 700–750 wild tigers remaining - Black market for tiger parts: inelastic demand meets extreme scarcity - The poacher’s insulin choice: poverty and desperation

Slide 11 — Two Markets Graph: Public TP (4 min) - Demand shifts left → P falls, Q falls (A → B) - Change in demand, change in quantity supplied - Determinant: tastes/preferences (pandemic mandates)

Slide 12 — Two Markets Graph: Private TP (4 min) - Demand shifts right → P rises, Q rises (C → D) - Same determinant, opposite direction - “That’s why the Great Toilet Paper Shortage happened”

Slide 13 — The Elasticity Spectrum (2 min) - Table 2: from corn chips to tiger eyeballs - Key determinants of elasticity

Slide 14 — Check Yourself + Next Class (3 min) - Problems 1–2 in class; 3–5 for homework - Next class preview - “And that brings us to the end of our tale of two toilets and tiger eyeballs and heroin and coffee.”

References

Blake, William. 1794. The Tyger.
Cowen, Tyler, and Alex Tabarrok. 2024. Modern Principles: Microeconomics. 6th ed. Worth Publishers/Macmillan.
World Wildlife Fund. 2025. Tiger Population and Conservation Status. WWF Species Profile. https://www.worldwildlife.org/species/tiger.
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