Reference no: EM133255537

Assignment:

During certain events such as hurricanes, the pandemic, etc. we sometimes see shortages of goods available whether that be in a hurricane bottled water, gasoline, generators, etc. or in the case of our recent pandemic shortages of flour, sugar, canned goods, etc. was also seen.

Here is a fictitious scenario:

A hurricane was projected to and then hit Central Florida knocking out power to millions of residents for what is expected to be at least a week or two before many would get power returned. Due to the projected path there was an increase in the demand for generators resulting in all the stores in the area being "out of stock" on generators prior to the storm with no new generators to be available for also a week or two. A man in Chattanooga can see the demand for generators has increased significantly so rents a U-Haul truck in Chattanooga driving south on Hwy 75 stopping at Home Depots and Lowes along the way buying generators for, say, $400. By the time this man reaches Central Florida he has over 50 generators for sale. He stops on the side of the road, puts a sign on the side of the U-Haul truck that he has generators for sale at $900 each.

Using what we learned about Demand why is he able to sell generators for such an inflated price (use a determinant to explain). Would it be beneficial to allow this man to sell these generators? Why or why not?

Note: I understand there are laws that may not allow price gouging, but assuming it was legal, would the above scenario benefit or harm society from an economic perspective? Why?