Is Price Gouging Bad - Essay Example

Price Gouging is Good Price gouging is providing good and services for sale at a rate which is more than market price where there is no alternative available. In most cases, price gouging occurs after disasters which create the need for basic items such as water, food and electricity which become scarce after the disaster. Many scholars have argued that price gauging is not bad as the government puts it and legal measures should not be taken for those who do it (You Tube). In order to prove that price gauging is good this paper will use the state of Mississippi just after it was hit by hurricane Katrina as a case study.

Price gauging is good because it attracts suppliers to areas where there is limited or no supply of basic good. After hurricane Katrina hit Mississippi over 5 million people were living without power hence there was a high demand for generators. This would attract suppliers such as John who will want to maximize on profits since they will sell the generators at a high price. Due to the law of supply, this would have attracted more suppliers of generators to Mississippi who would benefit from the high prices at which the generators were being sold.

Due to the high number of suppliers, the price of generators will eventually fall since suppliers will lower their prices due to the competition for them to gain more customers. This will result in the equilibrium price of the generators falling back to normal due to the forces of supply and demand.Work CitedYou Tube. Price Gouging -- Stossel in the Classroom, 2009 Available at: http://www.youtube.com/watch?v=R6ojYtKazgQ