Florida, like several other states, has passed a law that prohibits \"price goug
ID: 1140639 • Letter: F
Question
Florida, like several other states, has passed a law that prohibits "price gouging" immediately before, during, or after the declaration of a state of emergency. Price gouging is defined as "...selling necessary commodities such as food, gas, ice, oil, and lumber at a price that grossly exceeds the average selling price for the 30 days prior to the emergency." Many consumers attempt to stock up on emergency supplies, such as bottled water, immediately before and after a hurricane or other natural disaster hits an area. Also, many supply shipments to retailers are interrupted during a natural disaster. Assuming that the law is strictly enforced, what are the economic effects of the price gouging statute? The statute acts as a price ceiling and will result in a shortage. The statute acts as a price floor and will result in a shortage. The statute acts as a price floor and will result in a surplus. The statute acts as a price ceiling and will result in a surplus.Explanation / Answer
Price gouging will prevent any increase in the price of goods at the time when the demand is high. It will act as a price ceiling i.e. no seller can sell the goods at a higher price and it will result in a shortage.
The answer is "A", The statute acts as a price ceiling and will result in a shortage.
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