Case Study
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George Washington University *
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Course
2001
Subject
Economics
Date
May 7, 2024
Type
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2
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What is price gouging?
-
Increasing price unfairly/in a way that isn’t based on increased production cost,etc.
-
During period of supply or demand shock
-
What are its defining features?
-
Market dominance/limited sellers (i.e., Monopolies)
-
Spike in demand/drop in supply
-
Often essential goods
-
Might have to be during a period of emergency (Hurricane, pandemic, etc.)
Who are the actors in the case?
-
Platforms (Amazon, eBay, etc.)
-
Sellers
-
Consumers
-
Government/Regulatory
Local Knowledge: Who has it and how do they use it?
-
Seller (taking advantage of high demand in cities, rural area doesn’t have same
demand)
How do consumers economize?
-
Prioritized getting N95 masks to healthcare professionals
What barriers to the price mechanism were used in this case?
-
Price ceiling
Who created or imposed the barrier?
-
The government (with existing price gouging laws)
-
The platforms
What was the consequence?
-
Resulted in thousands of sellers not being able to sell their products
-
Stockpiles of products could not be distributed to those still willing to pay a premium
Thinking strategically
-
Main goal is to make as much profit as possible given the situation
-
Actions available include switching to different platforms if restrictions are placed on the
ones previously used, attempting to create a new account on that original platform, or
selling abroad to a location without restrictions
-
Depending on if the action is intended to be more profit based or more ethically based,
either continue to accumulate inventory and sell, or maybe donate the inventory to those
that need it like the guy in the article
1.
Who are the actors in this case? That is, who is making decisions? Be thorough. (bullet points
acceptable)
a.
The actors in this case consist of the third party sellers, the consumers, the government,
Amazon and other platforms selling the hand sanitizer, the hand sanitizer brands. The
third party sellers are the ones getting the goods and selling and marking them up for the
consumers with a need and demand to buy the goods. The government is a decision
maker as they apply their jurisdiction in price gouging through passing laws that combat
it, such as California barring sellers from increasing prices more than 10% in a declared
emergency. Amazon and other platforms like it are decision makers in how they manage
the price gouging by removing sellers. Finally, the hand sanitizer brands are a decision
maker because they originally set the prices of their goods low enough for sellers to price
gouge. They also need to account for the demand and increase their production to meet
them.
2.
Give one example of use of local knowledge by an actor in the case.
a.
One example of a use of local knowledge by an actor in this case was the way in which
Colvin accumulated his resources. He knew that there was an elevated necessity for
essential supplies such as purell and masks in cities due to the pandemic. Therefore he
went to more rural areas (he uses an example of: “the Dollar General in the middle of
nowhere outside of Lexington, Ky,”) to buy them, because their prices were much lower.
By then listing them online for a much higher price he was able to turn a significant profit
because he deduced that buying from an area with lower demand and selling to an area
with higher demand would benefit him.
3.
Give one example of economizing behavior by a consumer in the case.
a.
One example of economizing behavior by a consumer is the consumers specifically
prioritizing the N95 masks to be distributed to healthcare officials. The nurse in particular
mentioned in the article was specifically looking for N95 masks and clorox wipes, which
third party sellers would take advantage of by hoarding these particular masks and
hygiene products and significantly increasing the price, taking advantage of their
essentiality. These specific needs by consumers due to Covid protocols could ultimately
enable arbitrage and price gouging.
4.
Give one example of a barrier to the price mechanism in the case. What actor (or actors) created
or imposed that barrier?
a.
One barrier to the price mechanism in this case is the existing price gouging laws in
place. For example, New York’s law which prohibits sellers from charging an excessive
price during emergencies or California’s law that prevents sellers from increasing prices
by more than 10% during emergencies. Laws like these in New York and California set a
barrier in place to bar sellers from extreme price gouging. The actors that created these
barriers are the NY/CA government/law makers.
5.
Choose one actor. In approximately five sentences (bullet points acceptable): What are this
actor’s objectives or goals? What actions are available? What is the best course of action for this
actor?
a.
One group of actors are the resellers of the products. Their objective is to make a profit
off of their original investment. With additional restrictions being imposed by platforms
such as Amazon and eBay, the number of actions available have decreased for these
actors. Alternatives such as selling these products locally, reducing their margins in a way
that satisfies the platforms, and/or donating these products to those in need would all be
feasible actions. If these sellers had previously made a significant profit off the reselling of
these essentials, they could decrease their taxed income by donating the excess
inventory, which would provide them with a tax deduction. Otherwise, it would be ideal for
these actors to be able to recoup their initial investment by either selling their inventory at
cost or slightly above cost.
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Related Questions
In this problem, p is in dollars and q is the number of units.Suppose that the demand for a product is given by
(p + 7)
q + 6
= 1120.
(a) Find the elasticity when
p = $33.
(Round your answer to two decimal places.)(b) Tell what type of elasticity this is.
Demand is elastic.Demand is inelastic.
Demand is unitary.
(c) How would a price increase affect revenue?
An increase in price increases revenue.
An increase in price decreases revenue.
Revenue is unaffected by price.
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- demand curve shifts to the right
- supply curve shifts to the left
- supply curve shifts to the right
Note:-
Please refrain from offering handwritten solutions. Please ensure that your response maintains accuracy and quality to avoid receiving a downvote.
Take care of plagiarism.
Answer completely.
You will get up vote for sure.
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Which of the following is the correct definition of price elasticity of demand?
(a) The percentage change in the quantity demanded divided by the percentage in
income.
(b) The percentage change in price of a good divided by the percentage change in the
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(c) The percentage change in income divided by the percentage change in the quantity
demanded.
(d) The percentage change in the quantity demanded of a good divided by the
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What
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A. You could promise to offer a product at a low price. You could show your commitment to offering a low price by increasing production capacity to lower your marginal cost.
B. You could promise to offer a product at a high level of quality. You could show your commitment to offering a high level of quality by increasing your budget for advertisements.
C. You could promise to offer a product at a low price. You could show your commitment offering a low price by decreasing production capacity to raise your marginal revenue.
D. You could promise to offer a product at a high level of quality. You could show your commitment o offering a high level of quality by investing in a new production technology.
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() a) True
( b) False
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Term used to describe demand that is uncertain and needs to be forecast.
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PRICE (Dollars per unit)
350+
225
175)
50
0
Region
Between Y and Z
Between W and X
Between X and Y
Z
True
False
X
28
36
QUANTITY (Units)
For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit
elastic, or inelastic.
I
56
W
Demand
True or False: The slope of the demand curve is equal to the value of the price elasticity of demand.
Elastic Inelastic Unit Elastic
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Drag the answers to the image and click next to submit your answer.
Local content requirements
Legal structure in place
Financial incentives to investors
Nationalization
Property rights
Confiscation of property
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Retailer companies sell many products for which manufacturers have a suggested retail price printed on the package. Based on what we discussed in the course, is there an economic reason for this price? If you are the manager of a retailing outlet, what factors will determine whether you should charge the suggested retail price or some higher or lower price?
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If the absolute value of the price elasticity of demand for season football tickets is 0.3, to increase total revenue the university should _____.
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
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more elastic; 1.8
less elastic; 1.8
more elastic; 0.56
less elastic; 0.56
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a. Find the supply and demand equations
b. Calculate the new demand curve if the demand shifted by + 5%.
c. If the government refused to let Americans raise the price when demand increased in (b) above, what
shortage is created?
d. Show the shortage in a graph. Label your graph.
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the variety of supply curves
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Price
Quantity
(Dollars per crossing)
(Thousands of crossings)
8
0
7
100
6
200
5
300
4
400
3
500
2
600
1
700
0
800
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, and it ( would or would not)? produce the efficient level of output.
If the company is interested in maximizing profit, it (should , or should not)? build the bridge because profit would be
. (Note: If the company incurs a loss, be sure to enter a negative number for profit.)
If the government were to build the bridge, it should charge a price of $ ?
True or False: The government should build the bridge.
True
or
False
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True
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(ii) Is demand inelastic or elastic?
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