This is the latest in a series of posts by Professor Brian Cutsinger on issues in price theory. Subscribe to Cutsinger’s EconLog RSS feed to see all Cutsinger issues and solutions.
Please share your proposed solutions in the comments. Professor Cutsinger will be participating in the comments over the next few weeks and will post his proposed solution shortly thereafter. May the graph be favorable to you and may the price theory last forever!
Question: Texas minimum construction standards require all plumbing fixtures to be WaterSense certified. Examples of requirements under these standards include low-flow faucets, shower heads, and toilets.
For the sake of argument, let’s assume that it cost $250 to install a normal flow toilet before the low flow toilet requirement went into effect. Also, suppose the regulations cost an additional $100 to install a low-flow toilet, and the customer appreciates the savings of $25 per low-flow toilet.
Show how the demand and supply curves for toilets change as a result of this law. What will be the price of a new toilet (giving a variety of new prices will suffice)? Who benefits from the law? The plumber, his customer, both, or neither? Justify your answer.
