Question

1) Economists have traditionally assumed that consumers are rational: they use their incomes and time to make themselves as well off as they can. But recent research shows that consumers also want to be treated fairly. Surveys have found that many consumers believe it is unfair for firms to raise the prices of some goods after a sharp increase in demand (for example, following a tropical storm) while the same increase in price following a decrease in supply is deemed to be fair. How can this research explain why Target and Amazon have limited the sale of some items they sell and penalize price gouging by online sellers?

2) A black market is a market in which illegal sales take place between buyers and sellers. How is price gouging different from black market transactions?

Please provide any links or references. Please cite any external sources and if there are any graphs please use that to substantiate your points.

Answer 1

The solution with an explanation of the first problem would be.......