We just learned about the concepts of supply, demand, and equilibrium in Chapter 3, and we discussed price gouging a bit in the discussion board as well. This question is asking you to go more in depth on these concepts. In 1980, when Mount St. Helens blew up, the ash cloud adversely affected the potato-growing region in neighboring Idaho. Potato output there was greatly diminished. However, the Rio Grande region of Southern Colorado, a smaller potato-growing region, witnessed rapidly rising prices for this crop. The potato growers of Colorado were receiving a windfall from the troubles affecting the Pacific Northwest. Should potato prices have been allowed to rise during the catastrophe? Again, there is no singularly correct answer. However, be sure to explain your reasoning and rationale in making a decision utilizing the terminology, ideas, concepts, and knowledge gained thus far in the course. Also, be sure to address who's interest you are considering when making your determination.
Yes, rising prices are the best response to shortages and related rationing issues.
Yes, these are market dynamics. The shortage of potatoes caused by the eruption would naturally lead to higher prices.
No, rising or falling prices should be in reaction to the normal forces of supply and demand. In times of natural disasters (hurricanes, floods, volcanic eruptions), price limits should be imposed.
No, one region should not enjoy a windfall at the expense of another. Either prices should have been capped or part of the windfall redistributed to the hurting potato farmers of the Northwest.
Yes, these are market dynamics. The shortage of potatoes caused by the eruption would naturally lead to higher prices.
The rise in prices is in anticipation of the supply shock that was a result of the erruption and the destruction of the potato farms. This rise in prices is necessary so that the remaining crop that the adversely affected farmers have left can be sold at a higher price to let them make up for the lost crop and still have a decent enough livelihood. If a price cap is imposed in such a scenario, then it will affect these farmers whose crop has been destroyed, as they will not be able to recover the lost revenue by selling the remaining part of their crop that they still have, and they will be forced into massive losses.
We just learned about the concepts of supply, demand, and equilibrium in Chapter 3, and we...