Governments Action to Deter Price Gouging - Essay Example

Economics but as a science and as a policy tool should be used to better a lot of people and not to aggravate their condition during their trying times.

There will be people who are willing to pay for premium prices just to get the generator and in effect, that will raise the prices. 

Without government intervention during a state of emergency, the dynamics of the market will take over.  For example, if the supply of a generator is 100 and the demand suddenly increased to 1000, its typical price of let say $100 will shot up to even a thousand because the demand curve increased without increasing the supply curve.

When the government intervenes however the market will be distorted because it is forcing the price to remain at its previous level even if the demand curve is increased.  But this is not necessarily bad because the demand is also temporary.  Eventually, when normalcy returns to a disaster-struck area so will the price because the excessive demand will be diminished.