Price gouging is good for at least two reasons and it all has to do with supply and demand. Right now, demand is high for certain products. There’s not enough supply to meet the demand, so what do we do? Do we just cross our fingers and hope the suppliers ramp up production to meet our demand? Hope is good and we should have that, but we have more than that. What we want is supply to meet demand. How do we do that? We either increase supply or decrease demand. Price gouging does both. (It’s really market forces without governmental intervention.)
First, if we increase the price of a product, say toilet paper, the demand will decrease. Folks will think twice before hoarding those precious rolls leaving some for others that may really need it. Second, the higher prices will incentivize more production. Those toilet paper manufacturers will naturally want to supply more if they are going to make more money. As more product comes into the market, increasing supply, it will meet demand and the price will go down.
Yes, it is emotionally satisfying to be against price gouging. But the next time you go to get some TP, ask yourself how the restrictions on price gouging are doing. Thank you, political leaders, who really only follow and rarely lead.
