Price gouging is the elevation of prices to take advantage o

Price gouging is the elevation of prices to take advantage of a crisis or emergency situations that may impact the competitive environment. Examples of price gouging took place after Hurricane Katrina devastated the City of New Orleans, and more recently with hurricanes in Texas and Puerto Rico. Should this practice be considered unethical and, if so, why is it considered unethical if prices are intended to reflect what the customer is willing to pay?

Solution

Price gouging refers to the practice of price hike of a good or service by a seller to a higher extent where it usually becomes an unethical practice. It can be said as morally right practice in some situations and in some, it can be said as immoral. In many situations, price gauging is an unethical practice for example, after a natural disaster like hurricane, flood, etc. or during an emergency situation, the unnecessary hike in prices is not considered ethical. Also, some debate that it is good for the economy because higher prices of the goods encourage sellers to enter the market and also results in bulk buying of those goods by customers due to scarcity. Thus, the resources will be used judiciously because the producers will sell less and buyers will consume all of the purchased commodity judiciously.

Price Gouging is considered unethical as it is seen \'taking the advantage of vulnerable\'. When prices rise, especially during natural disasters, it is the consumer who is burfdened to pay the price of those commodities which are \'necessities\'. Thus, in this situation, the consumer did not choose to pay a higher than usual price, rather, is forced to pay a higher price, that too, in a situation where the resources are already scarce. Thusl, it is usually not what the customer is willing to pay, but, is what he is made to pay in that situation. This is a disadvantage for the consumer but is an advantage for the supplier. That is why, the prices in price gouging do not always reflect what the customer is willing to pay and this practice is considered unethical in the case of a natural disaster.