Should Price Gouging Laws Should Not Be Legal?

Natural disasters cause extreme situations that force people into shock and a state of emergency. Grocery shelves become empty, less resources are available to the public, and this is all caused by price gouging laws. When it is announced that there is a natural disaster on its way people start to stock up because they realize that resources won’t be available once the disaster hits. If price gouging laws are in place everyone at stores will buy more than what they actually need just to be safe. This can be fixed by banning price gouging laws so that goods can be sold at higher prices to reduce scarcity of necessary items and to attract sellers to bring essential goods towards the area in need. This will benefit everyone involved because the
However, what they don’t realize is that when price gouging laws are legal then all goods are sold based on the theory, first come first serve. When prices are the same in a state of emergency this allows consumers to buy products in bulks which leaves none left for anyone else. Another concern people have is that the poor people will be discriminated against because of such high prices for necessary items. However, passing laws against price gouging doesn’t guarantee that the poor people get necessary items, and these laws discourage businesses supplying these essential items to the market. Art Carden said in the video titled Is Price Gouging Bad, that he believes a law against price gouging is going to prevent people from bringing a desired good to the market (1). When businesses or citizens are able to make profit off of selling a good they are obviously going to take advantage of this. Some arguments state that prices will continually go up when selling goods to people during a natural disaster, however, due to allocative efficiency consumers are willing to pay more for the product as long as the marginal utility for the good also increases. This also leads into the concept of a free market economy, where the prices of goods and services are completely determined by supply and demand instead of being regulated by government policy. Free markets during natural disasters will highly
When there is a state of emergency the incentives of both buyers and sellers change. The buyers will have to contemplate how much of the resource they really need and how much they are willing to pay for certain resources. Also sellers will supply more goods because they recognize the higher demand for certain goods and they know they will be able to make some profit, which leads to more resources being available. Both of these situations benefit the people because there will be more resources available to them and consumers won’t buy more goods than they need so more people will benefit from this. Economists believe that higher prices for vital resources is an accurate representation of the greater cost and risks of supplying these items. In the article, “The Economic Case for Price Gouging” Corinne Purtill states, “Without the incentive of a profit, suppliers of goods outside the affected area will be less motivated to bring products into disaster zones” (2). For consumers this means instead of having to pay higher prices for goods, there will be no goods to pay for due to shortages. Price ceilings would not be necessary because vital goods would stay within market-reflective prices so that suppliers of these goods can still make a profit. When natural disasters hit the sudden decrease in goods is considered a supply shock. This changes affects the equilibrium price of the