The branch of knowledge concerned with the production, consumption, and transfer of wealth. It often coincides with politics in United States
Long Island got hit particularly hard during Hurricane/Superstorm Sandy and as such it is the first time in my life that I have witnessed gas shortages. From accounts that I have read it is a two pronged problem. One, ports around us and entry ways onto the island have been destroyed, flooded, etc., so the normal amount of gas can’t get here. Two, a ridiculous amount of gas stations do not have power so the gas that is in the wells is just sitting there. Both of my brothers have waited for hours only to get in sight of the gas station when they were told the station had run out of gas!
What is Price Gouging?
According to Wikipedia, most states (34) have laws enacted against price-gouging which is defined in terms of three elements:
- Period of Emergency: The majority of laws apply only to price shifts during a time of disaster.
- Necessary items: Most laws apply exclusively to items which are essential to survival.
- Price ceilings: Laws limit the maximum price that can be charged for given goods.
A prevalent concern surrounding price gouging is that it exploits consumers. Supporters of anti price gouging laws argue that it is morally wrong for sellers to take advantage of buyer’s vulnerability and increased demand. Buyers are not coerced to take part in this exchange and they voluntarily agree to pay the seller’s asking price. In addition to these mandated laws, many businesses avoid increasing prices after a disaster in order to avoid consumer backlash and stigma.
Price gouging laws seem like the “right” or “just” bill to have on the record but they are obviously opposite of normal supply and demand curves:
The difference between P1 (Price 1) and P2 (Price 2) is an increase in supply and thus a decrease in price. In the case of gas on Long Island the new supply is MUCH less and thus the price should increase. While gas has increased it is certainly not a free market increase as evidenced by 3 to 4 hour lines.
It would be interesting if one station that had no line just raised it to $8.00 per gallon. It would take those that had the drive and means off the line shortening the main normal lines, it would allow those with the desire for gas to fill up at a higher price and the station would receive more profits.
But where does the “utopia” end when every gas station moves to $8.00/gallon and then price gouging is evident?