Question

Explain what “price gouging laws” mean, how they work and the market outcomes during different times. You may use an example and/or graphs to help explain the topic.

Answer 1

Answer : 'Price gouging law' states that sellers raise the price of their products at different different situations. There occurs three different situations in the market when the sellers raise the product price than considerable price. These are :

(i) Emergency time period: like war, tsunami etc. In these situations sellers sell their stock products at highest price rate to earn profit.

(ii) Necessary products : Often sellers raise the price of products which are essential to human beings to survive. For example : food, cloths etc.

(iii) Celling price : By this law sellers select the maximum price level for products under which at any price level they can sell their products.

At the above three different situations sellers increase their products price levels which creates problems to buyers to adjust the situations.