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When a hurricane hits the coast of
Florida, prices of many necessities like food, water, hotel
rooms, gasoline, and even plywood, tend to increase. Some
governments try to prevent such price increases and call
them "price-gouging".
But economists think that such price
increases are GOOD for the people ravaged by the hurricane.
WHY? Why is it GOOD when the prices of products (like
plywood) increase during a natural disaster?
ANSWER: Allocative
Efficiency
*NOTE: There will be a short case
study for each lesson. The case study does not include
everything from the lesson but it will highlight an
interesting and important topic. The case studies are meant
to grab your attention and help you APPLY a concept from the
lesson to a real world issue. At first the case study may
not make sense. In fact, many will appear contrary to common
sense, (like why are high prices GOOD for the people
suffering from a natural disaster), but after finishing the
lesson you should have a better understanding of the case
study or ask for help in class or on the Blackboard
discussion board.
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