Price gouging. It was the obvious hot topic in this week’s class. An issue like price gouging is always going to be debatable, mainly because it is something that will arise compassion in some people, and realism in others. Before writing this blog, I started off by trying to do a little research. Even typing “price gouging” into Google returned some extremely varied results. A “Price Gouging Saves Lives” link is below a link to report price gouging to police. I wanted to figure out where I stood on this issue.
According to thefreedictionary.com, price gouging is pricing above the market price when no alternative retailer is available. I learned that here in Florida, price gouging is illegal, "It is illegal to charge unconscionable prices for goods or services following a declared state of emergency." Again, subjective words such as “unconscionable” really get under my skin in economics. Do you think any form of extortion and/or profit making really haunts MOST business owners’ consciences at the end of the day when they open the register? I didn’t think so either…but that was sort of a side tangent of mine, sorry readers….Moving on, as a part of my research I watched the John Stossel video on price gouging. I found it very interesting and he makes a good argument. Within the video, it had the story of a man who bought generators during Katrina and drove to Mississippi to sell them to families and people who needed them desperately, only he wanted twice what he had paid for them. Although people were excited about the generators and willing to pay, the man was thrown into jail and the generators confiscated.
This honestly disturbed me. I’m not saying the man was a hero, but to throw him in jail and confiscate the generators for evidence and deprive the desperate people of them downright stinks. But after watching that video and researching, I’m still not a 100% convinced either way. No, I don’t think it is exactly fair to charge $20 dollars for a bottle of water after a natural disaster, but I’d rather buy that bottle for $20 and have water, rather than go to the store and have every single pack of bottled water be sold out because people could afford to stock up for the next year. Yet, I know it is easy for myself and these Nobel-winning economists to sit back in our lovely houses with all the necessities in life and say “yeah sure price-gouging is great!” The realistic side of me says that in theory, price gouging makes sense, but my heart tells me if I was in a natural disaster or someone close to me was, I wouldn’t be so quick to jump on the price gouging bandwagon… Tell me what you think!
Sunday, January 31, 2010
Monday, January 25, 2010
Normal Goods vs Inferior Goods
In class this semester as well as last semester, we briefly discussed normal goods and inferior goods. A normal good is defined as a good for which demand increases when income increases, and for which demand falls when income falls. On the other hand, an inferior good is a good for which demand falls when income increases, and for which demand increases when income falls. Simple enough definitions.
However, then our teacher told us most goods are considered normal goods, but gave the example of Ramen noodles as an inferior good. This made me laugh, because personally, I enjoy Ramen noodles and I can’t think of a time when we haven’t had them, regardless of income increases or a promotion of my parents and/or myself. This got me thinking, what are more examples of inferior goods and normal goods?
The more I learn about economics, the more I see that economists seem to like to lump actions of people/concepts/goods into specific, clearly defined categories or groups. Then it hit me, there aren't really universally accepted inferior and normal goods. They can vary from person to person. For me a normal good is my iPhone, and an inferior good would be another phone. Yet, some of my friends would prefer a different phone over an iPhone, regardless of their high incomes just because they see a keyboard or other qualities important. And a Ferrari would be a normal good for most guys I know, but for me, I would never want a Ferrari, regardless of my income. Also, fast food may seem like an inferior good over a home cooked meal or another restaurant, yet a lot of people I know would rather go to Taco Bell than an expensive Mexican restaurant. Normal and inferior are subjective words, and each household and each person’s idea of an inferior and normal good will vary.
However, then our teacher told us most goods are considered normal goods, but gave the example of Ramen noodles as an inferior good. This made me laugh, because personally, I enjoy Ramen noodles and I can’t think of a time when we haven’t had them, regardless of income increases or a promotion of my parents and/or myself. This got me thinking, what are more examples of inferior goods and normal goods?
The more I learn about economics, the more I see that economists seem to like to lump actions of people/concepts/goods into specific, clearly defined categories or groups. Then it hit me, there aren't really universally accepted inferior and normal goods. They can vary from person to person. For me a normal good is my iPhone, and an inferior good would be another phone. Yet, some of my friends would prefer a different phone over an iPhone, regardless of their high incomes just because they see a keyboard or other qualities important. And a Ferrari would be a normal good for most guys I know, but for me, I would never want a Ferrari, regardless of my income. Also, fast food may seem like an inferior good over a home cooked meal or another restaurant, yet a lot of people I know would rather go to Taco Bell than an expensive Mexican restaurant. Normal and inferior are subjective words, and each household and each person’s idea of an inferior and normal good will vary.
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