Gouging...here is gouging... "Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions." AMERIKAS jobless rate to sky rocket to 30% plus once this goes into effect. Get ready for the out bound flight of Business.
Suppose you had a hardware store and there was a power shortage. Now you jack up the prices of batteries an extra two bucks a pack. First of all, you've lost your regular retail sales due to the power outage. No one is buying anything except batteries, so overall store sales take a hit, expenses remain the same. Secondly, if you would like to restock from a central warehouse, a trucking expediter is going to charge you wayyyy extra to supply you with a shipment of batteries quickly. The cost of the replacement shipment is greater. Why is the trucking costing you more? Could be overtime, maybe he'll put off someone else because this delivery pays better. Shit flows uphill on this one. The customer is gouged, the retailer is gouged, probably the trucker will be waiting in traffic, longer warehouse time wait/ Everybody is getting a little piece and it all adds up. What do you do? Pay the upcharge on another shipment of batteries or just close up shop till the power goes back on? In the end though "gouge" is a political term, invented by politicians. -----------------
Prices mean something. When prices are moving up, it means supply is limited relative to demand and that profit can be made by bringing in more supply. Few markets show this as well as gasoline. Without being too specific, my day job involves helping gas/diesel distributors keep gas in their gas stations. When there is a short supply of gasoline, they raise the wholesale price. This price filters to the gas stations and then people do actually drive less. This actually reduces the consumption of gas and lets the supply catch up. In the case of a natural disaster, "gouging" is a critically important market function. If gas stations were allowed to raise their prices to say, $10 per gallon, then people would just buy a few gallons instead of a full tank to get out of the disaster area. This allows more people to get the needed gas and they will conserve it instead of squander it, ie, buy a full tank, get out of the disaster area, then drive on that same gas for a week while out of danger. Meanwhile, someone else is stuck in the disaster area because the station is out of gas. Also, many distributors of gasoline operate regionally. If there is a hurricane trashing New Orleans and that causes a gas shortage, it is not economical to ship gas from say, Oklahoma to New Orleans at $4 a gallon (more realistically, shipping gas from Texas to Louisiana and from Oklahoma to TX). You would lose money at $4. But if they could "gouge" and charge $10, now all of the sudden it works to shuffle that supply around. Then people get gas. Same deal for water in a disaster. Its not worth it for someone to load up an 18 wheeler full of bottled water and shipping it do a disaster area unless they can charge an appropriate price. In summary, relatively high prices simply mean we need more supply of something. The higher prices allows more supply to be delivered profitably and limits waste.
A counter example that does actually illustrate something resembling "gouging" is Enron turning power supplies to intentionally create scarcity and force higher prices. But high gas prices at the corner station? Nah...
Assume you mean turning off power stations. And yes, that raises price. But when you get brown outs, you also get reduced quantity sold. Not likely that in the long term that would be profitable. Oh, and they went bankrupt.....................
It was extremely profitable, as it ended up dramatically affecting rate structures. One of the evilest organizations in US history.
Yeah. Two important words were "long term". Given that they ended up bankrupt.................. it was not profitable in the long term.
In my opinion, unless you are running a monopoly like "Enron" was, Price gouging (especialy during emergencies) doesnt make sense. You may be able to make a little more money during the emergency, but the amount of business you will lose due to negative publicity once things go back to normal will far exceed the extra you will make during the emergncy.
The negative publicity only comes from economic ignorance of the masses. Best answer is for people to read a fucking book. They bitch that there is a shortage of supply, and that they have high prices. WTF???
Im on your side, the majority of the time politicians use the term "price gouging" to score political points, and they neglect to inform the public of simple economic facts.