Increased Demand ≠ Gouging

With all of the power outages in the region, many people are seeking hotels. Demand is going up. Fox 5 DC noted in a headline that “Hotels Accused Of Price Gouging After Recent Storms.”

I commented:

Geez, somehow high demand isn’t to blame? Come on, Fox 5. Prices rise when demand rises. Do we really want hotels going to the first bidder or those willing to pay for a scarce resource?

I love how the reporter takes credit for prices dropping. Correlation doesn’t equal causation.

From the Council For Economic Education:

In a market economy, supply and demand are the primary determinants of pricing. When the supply of a product outpaces the demand for that product, prices will naturally go down as sellers compete for consumers. When the supply of a product is not able to keep up with the demand for it, prices increase – sometimes dramatically – in response to the sellers’ ability to attract consumers.

Other methods of distribution of products can be considered, but none would be any more or less “fair” than exchange of money for goods or services – the dominant method of distribution in a market economy.

However, not everybody chooses to raise prices during storms or other instances that would drive up demand. Home Depot, for example, didn’t significantly raise snow shovel prices during snowmageddon — the result? Shovel shortages.

Further reading:

FTC Staff Economist David Meyer: The Virtues of “Price Gouging”

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One Thought on “Increased Demand ≠ Gouging

  1. I want to gouge my eyes out.

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