Imagine you find yourself in a heat wave and your air conditioner has broken.Unable to find a new one at the store because of a price gouging law,you purchase an air conditioner on the black market.What role did the price gouging law have?
A) It increased the willingness of firms to supply air conditioners when they were out of stock at the stores.
B) It increased consumer demand for air conditioners.
C) It decreased the incentive of individuals to supply the good on the black market.
D) It had no effect on consumers or firms in this situation.
E) It increased the incentive of individuals to supply the good on the black market.

Question

Quizplus · Accepted Answer

Price gouging laws, by keeping prices artificially low, can lead to shortages as demand exceeds supply. This creates an incentive for black market activities, where goods like air conditioners can be sold at higher prices.

Imagine You Find Yourself in a Heat Wave and Your