Question

On Tuesday afternoon I noticed a lot of people at the gas stations filling their gas tanks up to prevent harm being done to their vehicles with the freezing temperatures that were expected for Wednesday. Normally, when there are increases in Demand, the equilibrium price increases as well. However, the prices were the same as they were the day before. Do you think firms like gas stations, grocery stores, etc. should increase the price when they know consumers are going to NEED their products? Would your view change if it was a natural disaster and firms were increasing prices for those affected?

Answer 1

It is true that during such period for all the prices the quantity demanded increases. If the sellers will increase the price then only those who really need the product or those who value the product most will be ready to pay for it.

If the sellers will keep the price unchanged then people will buy even when they don't require it. This will imbalance the market. Thus, economist advocates increase in price in order to bring demand in line with the supply and it will reduce hoarding by consumers tgey will buy only what they require.

This increase in price will have long term impact on the company who charge a higher price in a natural disaster. If the firms will charge higher price during disaster then consumers will not purchase their product in the long run since the firm tried to book profit during natural disaster. Thus, the firms profit will get affected in the long run.

So my point of view is that firms must not increase the price since it will affect the firms profitability in the long run.

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