Here's an amusing example of economics in action: Clorox's profit is up 23% in the third-quarter. Why would that be? Check out the news blurb from MarketWatch:
The bleach maker said profit was aided by sales of disinfectant wipes to combat the worldwide H1N1 flu virus, shipments of Hidden Valley salad dressing, and lower costs. These gains were offset by soft demand for Glad trash bags and promotional spending.
Let's dissect this, because it's a fascinating explanation of human behavior in action.
First, the easiest phenomenon: people are freaked out about H1N1. They're far more worried about this dangerous flu strain than they are the flu in most years. As a result, Americans are stocking up on Clorox wipes that kill bacteria and germs. Demand for these products increases, so do profits.
Next, let's think about trash bags. This might seem an odd one. Why has demand decreased? Well, consumption has decreased during the recession. Just last week, I noted the awful September spending numbers. When people are buying less stuff, they have less waste: they're throwing away less merchandise packaging and replacing fewer old products. As a result, they need fewer garbage bags. Although I have no clue where I'd find such data, I'd bet that garbage collected has decreased overall during the recession.
The salad dressing blip isn't as clear, and it may be more than purely recessionary. But I can think of two possibilities. One is that people are eating out less, so they're making their own salads and using more store-bought dressing as a result. Another explanation might be that people are eating more salads, because lettuce is cheaper than meat -- the recession diet! This seems a little less likely, but not wholly improbable.
With all the bad press macroeconomics has gotten over the past few years, it's nice to see that microeconomics is still holding up.
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