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Is Price Gouging Criminal or Is It Free Market Working Efficiently

Price gouging is a situation where the price of a good is raised higher than it is normal or

fair, this usually happens at times of natural disasters. In other words, price gouging is an

increase in price because of an increase in demand rather than an increase in supplier’s costs. In

the case study, after the occurrence of hurricane Sandy in New Jersey there was a limited supply

of necessities, such as, bottled water, fuel, flash light and canned food whereas their demand sky

rocketed and accordingly the market price automatically increased. However, in order to

preserve the shortage of necessary goods, due to constant supply and increasing demand, the

price was further raised which lead to price gouging.

During natural disasters when everybody is so vulnerable and dispersed, it is commonly

known that fellow human beings should unite for the purpose of human welfare and help each

other in any way they can. This also includes the businesses/suppliers who sell necessary items,

they can help by reducing the prices of such items to make it convenient for the people. However

this was not the case in New Jersey, where a can of coke was being sold at four dollars ,

accommodation at a hotel was $500 and a pair of D-batteries priced at seven dollars.

Price gouging during natural disasters is often considered as a crime, but if we look at it

from another perspective, during such calamities demand for necessities increases excessively

whereas the supply is constant and according to the law of demand and supply, when demand for

a good increases the price also increases. High prices play an important role in fairly distributing

the limited supply of necessities because people in such situations practice hoarding of goods in

order to survive in the short term not having a care for other fellow human beings, this way they
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refrain from storing excessive quantity as the prices are very high, hence, fair distribution of

goods.

It is assumed that the practice of price gouging is unethical as it allows a business to take

advantage of a disaster in pursuit of profits, however, it is better to raise prices to control uneven

distribution than artificially holding prices lower than the normal prices and allowing the lucky

customers to hoard away the goods at a better price whereas leaving the rest of the customers

with no supply. Furthermore, increase in profits during such situations may allow the

beneficiaries (of profits) to carry out welfare/charity work to help the affected people, hence,

circulating the profits back to the people.

Moreover, there is no need of holding a lottery, carrying out some sort of a rationing

program or selling goods at a first come first serve basis. Price gouging would automatically take

care of fair distribution of goods. Secondly, measures should be taken to ensure a constant

supply of goods during natural disasters to cancel out the effect of price gouging in order to

relieve people from high prices and uneven distribution.

Hence, it can be said that despite the fact that during natural disasters the normal practice

should be helping people get out of their misery and ensuring enough quantity of necessary

goods at a fair price, but given the increase in demand , the shortage of supply and selfish human

nature the implementation of price gouging is important in order to ensure that the limited supply

of goods are fairly distributed among the affected people .

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