Introduction
The restaurant business is the theme of the first piece. It discusses the implications of a rise in the minimum wage. The federally mandated minimum wage is the lowest hourly rate a company requires by law to pay its workers. The topic of discussion in this article is Florida Attorney General Charlie Crist’s decision to launch litigation against two hotels for engaging in price gouging in the aftermath of Hurricane Charley (Phillips, 2004). It was alleged that many of these businesses took advantage of their nearby residents.
The latter were distressed by using the natural disaster as a marketing instrument and profiting from the circumstance. According to estimates, the amount of money lost due to the destruction is over 11 billion (Phillips, 2004). The article states that the events that transpired before the catastrophe contributed to developing bad intentions. Since the Crossroads Motor Lodge advertised for rooms with the understanding that access to specific units would be difficult, the business received reports from guests who made reservations despite being aware of the potential for accessibility issues (Phillips, 2004). In a different case, some consumers believed they had been deceived when they were informed of no available rooms, which were nonetheless made available to those who paid more. A few of these clients could not get their money back (Phillips, 2004). The entire trouble was brought on by receiving incorrect information regarding the availability of rooms.
When asked about it, Crist said that individuals and families working to put their lives back together should not have to be concerned about price gouging. Even though billboards were spotted selling it for less than $50 per night, consumers had to pay more than $60 per night (Phillips, 2004). The rooms were promoted as costing less than $45 per night; however, they were unavailable, or customers had to pay more than $60 per night. Attorney Crist pointed out that more than 1200 complaints had been submitted, and the penalty ranged from $1,000 for a single infringement to $25,000 for several violations (Phillips, 2004). Thus, this article examines how a rise in the minimum wage may influence job opportunities.
They Clapped: Can Price-Gouging Laws Prohibit Scarcity?
The second piece discusses the consequences of reducing fuel prices on consumer purchasing power. It claims that a drop in fuel price would enhance consumer spending, particularly on non-essential products. It describes the devastation caused by Storm “Fran,” a category three hurricane that struck the Cape Fear coast in September 1996. It mostly harmed the triangle region of Durham, Raleigh, and Chapel Hill (Munger, 2018). As a consequence of the storm, fallen trees and strong winds damaged the roofs of hundreds of houses. Due to the absence of backup power, food in freezers and refrigerators began to spoil. Insulin, infant formula, and other needs were instantly rendered perishable by the extreme heat.
The primary argument of the piece is that this presented an opportunity for surrounding businesses to visit the impacted communities and offer everything that was missing. This was not practicable, however, since North Carolina’s “Anti-Gouging Law” prohibited the sale of anything at an unreasonable price (Munger, 2018). A commodity scarcity resulted in excess demand in the afflicted region and excess supply in the undisturbed regions. It discusses the loss of the fact that prohibiting the sale of items at exorbitant prices would not address the issue since individuals would protest about the premium cost but still acquire the item. By capturing consumers, distributing at increased prices reduces the product’s supply, resulting in a greater incentive to pay (Rietveld, 2018). The article argues that the best way to ensure decreased prices and a vast supply is to enable the industry to control and let consumers allow retailers to raise their prices, letting the market self-correct.
Price Increases after Disasters
According to the author, these regulations are damaging since price gouging only happens during periods of low demand, which is the only reasonable explanation. There are alternative options, for instance, a lottery, but this would be an example of a trader taking advantage of a lottery winner. The other possibility is rationing, which takes extensive organization and infinite awareness of where and in what quantities to get the goods. Alternately, a first-come, first-served policy results in bare shelves and exacerbates the anti-gouging issue. According to the article, merchants that overcharge for a commodity are not benefitting from the calamity but from pricing management (Mankiw, 2020). Consequently, the answer is to modify antiquated regulations that assure there is no supply shortage in times of crisis. Conversely, in The Problem with price gouging laws, the author believes that price-gouging regulations have two major disadvantages: They promote hoarding and discourage enterprises from increasing supply (Mohammed, 2013). Thus, he promotes a hybrid policy as s solution whereby prices are controlled, and more significantly, businesses have a financial motivation to boost supply levels via entrepreneurial means.
Graph B is the one that one should look at to understand how the minimum wage has increased. This can be attributed to the fact that a rise in the minimum wage will result in a surge in labor costs, which would ultimately improve eateries and boost the pricing of their dishes to offset the rise in the expenditure of labor when it occurs. This will allow the businesses to remain profitable. Since individuals will be capable of purchasing fewer meals for the exact value of money, this will increase the demand for meals at restaurants.
Graph A is the one that one should look at if one wants to understand why gasoline prices have been decreasing. This is because a reduction in the price of gasoline will result in a reduction in transportation costs, ultimately resulting in a reduction in the price of products and services. When there is a reduction in the cost of transportation, companies will be in a position to reduce the pricing of the products and services they provide. Since of this, there will be a rise in the demand for products and services because individuals will be able to spend a comparable sum of money on a greater quantity of items.
The first article is crucial to the week’s topic as the data presented implies a rise in the minimum wage would result in a reduction in employment, particularly for employees with low ability levels. The second article is significant because it emphasizes that price-gauging is a political problem requiring a political solution, for example, the passage of anti-gouging legislation to demonstrate resistance to shortages. The third article is crucial since it examines the moral implications of the legislation on price-gauging. The fourth article is significant because it offers a viable solution to the price-gauging problem during natural disasters.
Conclusion
Price gouging is not good as it is regarded as an immoral act as merchants take advantage of their customers by considerably increasing the prices. It raises the cost of products and services when people are in desperate need of them. For example, the cost of bottled water often rises after a disaster. Those impacted are evicted from their homes and compelled to pay more than twice the typical fee. Therefore, price gouging is not necessary and should not be encouraged.
References
Mankiw, N. G. (2020). Principles of economics. Stamford CT: Cengage.
Mohammed, R. (2013). The Problem with price gouging laws. Harvard Business Review.
Munger, M. (2018). They clapped: Can price-gouging laws prohibit scarcity? Econlib.
Phillips, R. (2004). Florida lawsuits allege price gouging. Cnn.com.
Rietveld, J. (2018). Creating and capturing value from freemium business models: A demand‐side perspective. Strategic Entrepreneurship Journal, 12(2), 171-193.