Demand and supply, Marketing Management

Explain in words and using a graph why the ban on price gouging may cause a long line for gasoline. Label the axis and all the lines. Be precise.

Price gouging in this context, refers to the rise in price of an essential good during /after a disaster. The cause is the fall in supply. the S curve shifts up to allow price to rise to P1, compared to P* earlier in  normal times.

With a ban on gouging, price will be back to P*. Now at this level, demand > supply. this leads to a shortage, and long lines as the no of people who demand the good > the supply of the good at P*.

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Posted Date: 4/3/2013 3:17:56 AM | Location : United States

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