A)
Price gouging occurs when, based on outside forces (i.e. natural disasters), producers charge a higher price for the same good than they charged before. Consumers are willing to pay higher prices because, at the margin, a bag of ice when there is no power is much more valuable than when they had power. Economists against price gouging laws show that by putting a cap on a goods' price, consumes are not encouraged to conserve the good, despite the fact that good is high in demand. One of price gouging laws' unintended consequences is that they discourage efforts to increase the supply to meet the increased demand. Price gouging laws are a relatively new phenomenon in the United States - the earliest laws have been around 40 years. There are ethical and emotion reasons behind the implementation of price gouging laws. Instead of selling their goods at elevated prices, in order to keep a "fair" reputation, producers may shut down altogether (thus reducing supply even more). Many believe that is better for merchants to be open with high prices than to not be open at all. When a disaster strikes, wholesalers redirect goods to regions with the greatest demand (this means slightly higher prices for non-disaster struck regions but it also means goods are getting to disaster struck regions).
B)
1. Did your views on price gouging change after reading the article? Why?
2. Are you willing to have higher prices in order to help those in disaster areas?
3. What are the moral and ethical responses to price gouging?
C)
While price gouging laws are intended to help consumers, in reality, they interfere with price signals and thus fewer resources get to where they are most needed.
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