Assignment
According to Wikipedia, "Price gouging is a pejorative term referring to when a seller spikes the prices of goods, services or commodities to a level much higher than is considered reasonable or fair, and is considered exploitative, potentially to an unethical extent. Usually this event occurs after a demand or supply shock: common examples include price increases of basic necessities after hurricanes or other natural disasters. In precise, legal usage, it is the name of a crime that applies in some jurisdictions of the United States during civil emergencies."
Price gouging regulation makes price gouging illegal in Florida during a state of emergency (e.g., Irma). This regulation does not allow prices of certain commodities (e.g., gasoline) to increase too much. Your job is to analyze the price gouging regulation: what it is (question 1), and what it does (question 2).
1. Describe the price gouging regulation in Florida. You might want to start with resources provided by the Florida Attorney General. You should also include some examples of price gouging that happened in Florida during Irma.
2. Analyze the price gouging regulation using tools we covered in class. In particular, analyze the gasoline market in Florida. Assume that this market is perfectly competitive. a) What is happening with the gasoline market (demand and supply analysis) during a natural disaster like Irma? You should conduct graphical analysis and support it with explanation. I do not expect numerical analysis; graphical analysis is enough. b) What is the impact of the price gouging regulation on the gasoline market during a natural disaster like Irma? Based on the tools you learned in class, analyze the price gouging regulation. You should identify which type of regulation (among many we covered in class) is the closest representation of price gouging regulation. You should conduct graphical analysis and support it with explanation. Again, I do not expect numerical analysis; graphical analysis is enough. Explain what happens with price, quantity, consumer surplus, producer surplus, and total welfare. In short, provide welfare analysis of price gouging regulation.