This research paper on sudden changes in price is based on the article “They Clapped: Can Price-Gouging Laws Prohibit Scarcity” which was authored by Munger, Michael in 2007.
Prices of goods or service changes suddenly due to changes in the market which are beyond the control of suppliers or customers, most of such price changes are unpredictable. According to Munger the Hurricane which occurred into the North Carolina coastline at Cape Fear 1996 created a lot of destructions which destroyed power lines and buildings….
The same applied to other goods such as gasoline which very few providers had generators to run their pumps hence those who had the generators raised their prices as well due to increased demand. The service stations which had generators had a monopoly on supply of gasoline therefore there was less competition customers….
In conclusion the increased cost of running the business to avail the goods or services are passed over to the customers. Customers at time of scarcity are much willing to pay more for the goods or services which they value so that they would get them when they are scarce. Hence, making the price of goods or services in demand increase their costs.
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