| Comment | It doesn’t....in classic economic theory models price gouging isn’t a thing.
I’ll copy the following from wiki as it explains the academic take on this better than I can:
“In a survey of leading economists, only 8 percent agreed with a proposal to prohibit "unconscionably excessive" price gouging during natural disasters in Connecticut. 51 percent disagreed with the proposal, 15 percent were uncertain and 8 percent had no opinion. The economists opposing the proposal argued that such legislation would lead to a misallocation of resources and lead to lower supply and greater scarcity of the resources”.
More is available at https://en.wikipedia.org/wiki/Price_gouging but basically economists pretty much agree and don’t recognise this as a thing as far as models go....In real life, probably just to prevent civil unrest etc. when people can’t afford basics that have been hiked then, governments apply a moral code and introduce some legislation but it is not often enforced. |
|---|