Price gouging has its purpose

Amid all the news about Hurricanes Harvey, Irma, Jose, and now Maria, the issue of price gouging arose as people flocked to gas stations and supermarkets to stockpile supplies.

Many see gouging as little more than a way for producers to make extra money off of desperate people who are trying to prepare for the destructive force barreling towards their homes. On the surface, this seems like an accurate summation. Firms are in business to maximize profits, after all, and they respond to trends in supply and demand curves to achieve this.

However, it is because of these flocks of desperate consumers that price gouging is necessary to ensure a widespread distribution of resources. When too many people buy too much of something, supply plummets and the good becomes unavailable to many or even most of those who need it. While it may seem that price gouging is merely producers' indulgence in greed, it actually discourages the hoarding of large quantities and enables more people in need to have an equal opportunity to acquire the resources they need to prepare for an impending catastrophe.

When a crisis is announced, consumers rush to the nearest gas stations and supermarkets to stock up on supplies. In response to this, supply decreases as demand increases. It is when the people who make it to the stores first and purchase the supplies in excess that the issue arises.

In a panic, people buy more than what is necessary to sustain themselves. Supply then plummets, and other people do not have the chance to gather supplies. The only way to prevent over-buying under these conditions is to increase the price, which in turn lowers demand. Higher prices might just look like an effort to stick it to consumers, but they actually give those further back in line a chance to collect supplies within a still-reasonable price range (no one was charging $100 per gallon) given the circumstances. Otherwise, it is a matter of first-come-first-served instead of supply and demand.