Question

Include an explanation please. 1. Would the demand for orange juice become more or less elastic if studies show that orange juice decreases inflammation. Explain why. 2. Price gouging laws A. restrict entrepreneurial behavior and consumer choice B. are enacted to encourage government sponsored relief efforts C. have little effect on distressed markets and thus are irrelevant D. Keep distressed markets in equilibrium by maintaining "normal" prices E. Are necessary and proper to prevent predatory pricing on victims of disasters

Answer 1

1. One of the major determinants of demand is the taste and preference of the consumers. The consumers will demand more even at a higher price when the taste and preferences turns in favour of a product. When health study reveals that the consumption of oranges juices reduce inflammation, the consumers will demand more of oranges juice by quitting the consumption of other fruit juices. Thus even at a higher price the consumers demand for orange juice will not decrease. Thus the demand for orange juice will be less elastic. In case of an elastic demand a higher price reduce the demand and a lower price increase the demand. But in case of a less elastic demand a higher price will not reduce the demand. In short the demand for orange juice will be less elastic if the study favors the health benefit of oranges juice consumption.

2. Price gouging is a practice of raising the price of a product or services to an unreasonable or unfair level in order to take undue advantage of a sudden increase in demand or shortage. Many economists support the price gouging on the ground that the price gouging help to clear the market when the supply in shortage or demand is excess. On the supply side, price gouging attracts more suppliers into the market. It also help to promote storing of goods for an emergency situation. It helps to encourages investment in the production of such goods and also encourages import of such items as it is more profitable to deal.

The anti gouging laws severely hit the consumers by making the shortage of commodities during emergency season. During disasters the demand for many items increase and if the market supply is controlled by anti gouging laws it is difficult for the consumers to get their wants satisfied. On the supply side price gouging gives more incentive to the sellers to supply more of the product. But an anti gouging law severely hurt the incentive of sellers to produce and supply the product.

Answer: A restricts entrepreneurial behaviour and consumer choice.