EconLog Price Theory: Pricing Plumbing

Welcome to the latest installment in our ongoing series on price theory problems with Professor Bryan Cutsinger. If you haven’t already, be sure to check out all of Cutsinger’s thought-provoking problems and solutions by subscribing to his EconLog RSS feed.

We invite you to share your proposed solutions in the comments section below. Professor Cutsinger will be joining the discussion over the next couple of weeks, and we will post his proposed solution shortly thereafter. Let the economic analysis begin, and may the graphs be ever in your favor!

Question: The Texas Minimum Construction Standards now mandate that all plumbing fixtures must be WaterSense certified, including low-flow faucets, shower heads, and toilets.

For the sake of this scenario, let’s assume that prior to the implementation of the low-flow toilet requirement, the cost of installing a traditional toilet was $250. Additionally, installing a low-flow toilet under the new regulations incurs an extra $100 for plumbers, while customers value the water-saving benefits of low-flow toilets at $25 per unit.

Let’s explore how the demand and supply curves for toilets shift as a result of this regulation. What impact does this have on the price of a new toilet? And who stands to benefit from this law – plumbers, customers, both, or neither? Let’s delve into the economic implications.