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Question: The Texas Minimum Construction Standards require that all plumbing fixtures be WaterSense certified. Examples of requirements under these standards include low-flow faucets, shower heads, and toilets.
Suppose, for the sake of argument, that before the requirement for low-flow toilets went into effect, installing a normal-flow toilet cost $250. Suppose also that installing a low-flow toilet costs plumbers an additional $100 under the regulations, and that their customers value the savings from low-flow toilets at $25 per toilet.
Illustrate how the demand and supply curves for toilets shift as a result of the law. What happens to the price of a new toilet (providing a range of new prices is sufficient)? Who gains from the law: plumbers, their customers, both, or neither? Justify your answer.
READER COMMENTS
David Seltzer
Oct 25 2025 at 5:27pm
Bryan: Assume toilets are an essential basic utility like electricity. My answer assumes elasticity of demand for toilets is .60. Prior to low flow toilets, equilibrium quantity demand is 100 at $25o. 25% percent increase in plumber’s cost is passed on to consumers. The supply curve moves up and to the left and the demand curve moves down and to the left to where the the quantity demanded and supplied in equilibrium is 76 toilets. Plumber’s surplus increases by $1600. ($350 x 76) – (250 x 100). Conversely, consumer surplus declines by $1600. If consumers save $25 per toilet, break even number of toilets is 64. I look forward to the answer.
David Seltzer
Oct 26 2025 at 1:48pm
Bryan: Rethinking my answer. If savings are $25 per toilet, the net cost to owners is $75. Supply surplus is $1650. (325 x 82) – (250×100) = 1650. Consumer surplus declines by $1650. Assumed inelasticity of .6. Supply curve moves up and to the left and demand curve moves down left where quantity demanded and supplied in equilibrium is 82 toilets. Lot of moving parts.
Matthias
Oct 27 2025 at 1:32am
I mostly agree with your answer, David. Bryan, finally a question that I don’t have nearly as much to nitpick on.
To expand on David’s answer:
Let’s assume that the _average_ customer values the low flow feature at $25, and that some people value these things at a lot more, say $150. These people benefit from the regulations, because their preferred kind of toilet became cheaper.
In the longer run, we could speculate about experience curve effects and economies of scale. Fewer toilets overall are being built, so they will become relatively more costly than in the counterfactual without the new regulation. But relatively more low flow toilets are being built, so they will presumably become cheaper than in the counterfactual (but still more expensive than vanilla toilets were in the counterfactual.)
David Seltzer
Oct 27 2025 at 10:52am
Matthias wrote; “Let’s assume that the _average_ customer values the low flow feature at $25, and that some people value these things at a lot more, say $150. These people benefit from the regulations, because their preferred kind of toilet became cheaper.” Wow! I hadn’t considered that. Another insight in learning to think like an economist. Thank you.
Knut P. Heen
Oct 29 2025 at 10:37am
What is the opportunity cost of the water? Will the toilets eventually go dry without the regulation? No water, no need for WCs and plumbers.
John Hawkins
Oct 30 2025 at 1:25pm
The phrasing of the question implies a flat supply curve at $250 shifting up to $350, meaning the price of the new toilet is fully passed on. Plumbers begin and end with no producer surplus, and consumers uniformly don’t value the product more than its cost. Neither gain from the law.
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