During natural disasters such as the flooding in Burma one policy choice is to do nothing, i.e. let prices rise and fall according to increases and decreases in supply and demand.A second policy choice is to interfere in the market, regulate prices, and prevent the price of goods such as corrugated steel roofing, gasoline, nails, water, food, etc. from rising. The argument frequently made to justify regulating prices is that owners of scarce goods are taking advantage of people in need----taking advantage of innocent people's misfortunes to steal their money and enrich themselves. This is immoral behaviour and should not be allowed. This second policy usually includes a reliance on government rather than the free market to bring in supplies of scarce goods and distribute them for free or at below market prices to alleviate shortages. 08:32 00 A ba bQuizzesThe second policy is more moral and would be better atrelieving the suffering of ordinary people during naturaldisasters.During natural disasters, conditions are so extreme that the freemarket cannot be relied upon to supply critical goods.Government needs to intervene or people will die.Existing owners of scarce goods in the natural disaster area willmake a lot of money selling these scarce goods to desperatepeople.Letting prices rise immediately after the disaster will shorten theperiod in which supplies of crucial goods such as food, gas,roofing, etc. are scarce.The faster and quicker prices are allowed to rise the faster andquicker supplies of scarce goods will reach people in need.Owners of scarce goods will hoard supplies when the naturaldisaster hits to drive prices up and make more money.There is no need for international assistance if the market isallowed to operate i.e. prices are allowed to rise and theimportation of goods into the disaster area are not inhibited.More food, gasoline, roofing, etc. are likely to be shipped intothe disaster area by people trying to earn a profit that bygovernents interested in "doing good".II

Policies are framed by the government for the betterment of the economy. Government intervention is…

During natural disasters such as the flooding in Burma one policy choice is to do nothing, i.e. let prices rise and fall according to increases and decreases in supply and demand. A second policy choice is to interfere in the market, regulate prices, and prevent the price of goods such as corrugated steel roofing, gasoline, nails, water, food, etc. from rising. The argument frequently made to justify regulating prices is that owners of scarce goods are taking advantage of people in need----taking advantage of innocent people's misfortunes to steal their money and enrich themselves. This is immoral behaviour and should not be allowed. This second policy usually includes a reliance on government rather than the free market to bring in supplies of scarce goods and distribute them for free or at below market prices to alleviate shortages

During natural disasters such as the flooding in Burma one policy choice is to do nothing, i.e. let prices rise and fall according to increases and decreases in supply and demand. A second policy choice is to interfere in the market, regulate prices, and prevent the price of goods such as corrugated steel roofing, gasoline, nails, water, food, etc. from rising. The argument frequently made to justify regulating prices is that owners of scarce goods are taking advantage of people in need----taking advantage of innocent people's misfortunes to steal their money and enrich themselves. This is immoral behaviour and should not be allowed. This second policy usually includes a reliance on government rather than the free market to bring in supplies of scarce goods and distribute them for free or at below market prices to alleviate shortages

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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