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ETH 301 CASE WK 1: Price Gouging Case Study

Essay Instructions:

PRINCIPLE-BASED ETHICS

Assignment Overview

Natural Disaster and the Retail Business Owner

In the aftermath of Hurricane Sandy, which hit the greater New York area in November 2012, the news was full of examples of price gouging—gasoline for $4 per gallon, a loaf of bread for $7, double rates for motel rooms, and on and on. This is a frequent response by retailers in the wake of natural disasters. The retailers involved (and not a few economists) argue that raising prices is a natural response to supply shortages and it is their right as business owners or managers to set their prices at levels that serve their interests. Many others (including politicians who favor laws against price gouging in such situations) take a dim view of what they see as taking advantage of consumers caught in vulnerable circumstances where choices for needed products and services are few. What do you think?

Case Assignment

Read the background material in the Presentations file for this module and Futrelle, D. (2012). Post-Sandy price gouging: Economically sound, ethically dubious. Time(November 2). Retrieved March 31, 2014, fromhttp://business(dot)time(dot)com/2012/11/02/post-sandy-price-gouging-economically-sound-ethically-dubious/

Then search the Internet for examples of price gouging. Apply that material to the pricing decisions discussed in this Case in answering the following questions:

  1. What ethical principles support, respectively, raising prices in the wake of natural disasters and opposition to such increases?
  2. Which approach would you advise a convenience store owner to follow in an area hit by a tornado or hurricane?

Write a 2-page paper (not counting cover and reference pages) explaining your analysis and advice. Reference any sources of information about normative ethics principles and give relevant examples.

Assignment Expectations

  • Your paper should be double-spaced and in 12-point type size.
  • Your paper should have a separate cover page and a separate reference page containing the full citations corresponding to the in-text citations you choose to use in the body of your paper.
  • Cite sources of information in your text.
  • Proofread your paper before submitting it.

 Upload your paper by the end of the module.

Essay Sample Content Preview:

Price Gouging Case Study
Name
Institution
Question 1
Price determination can be described based on supply and demand. In markets where competition is stiff, the price of a commodity varies until at time where the customers’ quantity demanded equals to what the producer is able to supply. At this point, the goods being supplied is the same as the quantity of goods being demanded meaning that the economy is at its equilibrium. The law of supply and demands therefore states that when either the supply or the demand exceeds the other, the price changes by either going up or coming down (Latham, 2010).
Generally, if the demand supersedes the supply the price goes up. In contrast, if the supply is high, the price is low. This scenario helps explain price gouging. Price gouging can be described as when the price of goods are higher than their normal price. This happens during times of crisis like natural disasters, whereby demand increases temporarily compared to supply. Price gouging is considered immoral and in some areas, illegal. However, economist do acknowledges that it results in efficient market outcomes (Futrelle, 2012).
Consumers are always willing to pay more when there is great demand for a product. When suppliers notice, for example, long queues of people wanting specific products, they consider obtaining more profit by increasing the price from the original market price of the product. Therefore, suppliers would need to acquire more of the product to try meeting the increased demand. Increased demand would mean that not everyone would get the product at the original price because a shortage may occur since the supplier would not be able to bring more of the goods within the shortest time required. For the supplier not to run into losses of going an extra mile to supply goods in time, they would be forced to raise prices to balance off the equilibrium. By doing so, everyone would be able to have the goods at the market price as suppliers maximize profit. This is the efficient balance, which is economical (Dwight, 2014). Although this could be criticized as a way of taking advantage of the market situation, selling goods at equilibrium price is economically right, which is ethical as it presents customer with equa...
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