New York AG Warns of Price Gouging on Masks Amid Air Quality Issues

EconEye Admin

3 years ago

Consumers are purchasing facemasks, air purifiers, and air filters as smoke drifts over New York from Canada’s wildfires. As demand rises, New York’s Attorney General is warning consumers to be wary of price gouging. New York law prohibits businesses from selling vital goods for an excessive price during emergencies.—usatoday.com

Answer the following questions to check your understanding of the story.

Does the New York law on price gouging achieve an efficient outcome?

a) No because the law will create a surplus of vital goods.

b) Yes because vital goods will be allocated by a method other than market price.

c) No because consumers want to buy more vital goods at the lower price created by the law than are available.

d) Yes because all consumers can buy vital goods during the emergency at the price that prevailed before the emergency.

Wrong! - If the price of vital goods isn’t allowed to rise during the emergency, can all consumers buy the quantity they want to buy? Why or why not?

That's Right! - At the lower price, consumers will want to buy more vital goods than are available and a deadweight loss will arise. The outcome is inefficient.

Who benefits from the New York law prohibiting businesses from selling vital goods for an excessive price during emergencies?

a) consumers who can find and buy vital goods at the pre-emergency price

b) all consumers

c) poor people who can’t afford to pay an excessive price

d) sellers because they retain the goodwill of their customers

Wrong! - Can everyone who wants to buy vital goods find them? Can sellers provide vital goods for everyone who wants to buy them?

Correct! - Consumers who can find and buy vital goods at the pre-emergency price benefit from the law. But all the consumers who can’t find the quantity of vital goods that they want to buy lose.

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