Microeconomic Topic Article Review: Price Gouging

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Microeconomic Topic Article Review: Price Gouging The recent Time Magazine article "Post-Sandy Price Gouging: Economically Sound, Ethically Dubious," evaluates the recent price gouging by businesses during Hurricane Sandy (Futrelle). Examples of price gouging include raising prices on batteries and gas to astronomic levels, with the knowledge that the captive public audience will purchase the products regardless of the price. Businesses that have raised prices include bodegas, supermarkets and gas stations. Although such price gouging is undeniably an economically profitable business measure, the article argues that it is ethically dubious since it takes advantage of the public. The principal microeconomic issue at work is supply and demand. The author invokes a number of economic theorists (both liberal and conservative) who endorse price gouging out of a belief that it is simply the natural manifestation of a capitalist society that relies on supply and demand. There is a belief that preventing price gouging allows consumers to act with little consequence for their actions. According to this line of thinking, a business is well within its rights to raise prices because they should respond to public demand; at other times, there is little demand, so they are wise to take advantage when there is significant demand. Moreover, economic theorists have argued that price-gouging is positive because it makes people question whether the item they are considering purchasing

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