Question

Florida, like several other states, has passed a law prohibits" Price gouging " immediately before, during, or after the declaration of state of emergency. Price gouging is defined as"''.... selling necessary commodities such as food, gas, ice, oil and lumber at a price that grossly exceeds the average selling price for the 30 days prior to the emergency. " Many consumers attempt to stock up on emergency supplies, such as bottled water, immediately before and after a hurricane or other natural disaster hits an area. Also, many supply shipments to retailers are interrupted during a natural disaster. Assuming that law is strictly enforced, interrupted during a natural disaster.

Assuming that the law is strictly enforced, what are the economic effects of the price gouging statue ? Please explain in great detail.

Answer 1

price gouging simply is speculation in the time of emergency. severe price hike in most of the necessety commodites after of before any kind of national emergency or natural hazard is known as price gouging. it is unethical and also considered as a crime in some nations. if the laws are stricltly enforced in such situations to stop price gouging then there will be no rush to stock up the commodities in advance for the unforseens because now people know that price will not go up unexpectadly. actually price gouging is both a cause and effect of price rise. people anticipate price rise and then they start to hoard things which increases the price to another level. if price gouging is stopped then there are chances of supply shock if there is any kind of problem of transportation due to natural disaster. in this situation the price might go up but not upto the level where price gouging may lead to. the law enforced on price gouging will help to maintain the price level in the economy and will help to prevent un anticipated inflation in the market.