One of the results of Hurricane Katrina several years ago was dramatic increases in the prices of most products in Louisiana. This prompted complaints of “price gouging” and demands for government protection of consumers and punishment of the price gougers.
Write a 1-2 page essay using the theory of supply and demand to analyze the impact of Hurricane Katrina on goods prices in Louisiana. (This assignment does not require research. If you don’t remember Hurricane Katrina, read this or think about any hurricane you do remember.) Exactly why did prices increase? Show graphically and explain in detail. In your essay, be sure to consider the following points. Was it appropriate or not for prices to rise? Define “price gouging” in your own words. Explain the extent to which the price increases in Louisiana were examples of price gouging or not. Should government have prevented the price increases? Who would have benefited and who would have been harmed if the government had prevented those price increases?
HINT: You may find it useful to consider the concepts of equity and efficiency in your answer.