CTI Capstone Exam 2
- Price gouging occurs due to a downward shift in supply. It is an increase in pricing, after a
natural disaster. For example, after a hurricane the demand for wood that is used to rebuild
house, would increase. If suppliers increased the price, it would be considered price "gouging".
However, the increase in price results from an increase in demand. In order for supply and
demand to equal at a set price with the rise of demand, price must also rise. This scenario is
both positive and negative. In many way it is positive because it encourages individuals to
prioritize their needs and only purchase what they need. However, it also has the potential to
lead to large amounts of unmet needs. - ANS-4. What is price "gouging" after a disaster such as
a hurricane? Why does this occur? Is this a positive or negative practice? Explain your answer.
- The fact that all resources, which have various uses, are limited, results in scarcity.
- This means that society must make trade-off to decide where resources operate most
efficiently. - - society values different products and services differently = unmet needs
somewhere.
- The core values of scarcity and alternative uses determine the basic principles of supply and
demand. Thomas Sowell, argues that a market economy is the best way to determine
alternative uses and guarantees that resources are allocated in the most efficient way possible.
When few goods are available, scarcity results from all resources that are being limited. Scarcity
and alternative uses are at the heart of economics because products can be used for any
different purposes, which is left to the economy to decide the best way to use these resources
most efficiently. - ANS-3. Explain why scarcity and "alternative uses" are at the heart of
economics.
- time and effort spent on increasing production.
- ineffective work
- led to a huge supply, (supply wasted)
- This demonstrates the inefficiencies in a government run economy. Additionally, as the supply
of pelts increased, the price of pelts did not drop to ensure there was a demand because the
government was in charge of setting prices and was unable to respond rapidly to the
fluctuations in supply. - ANS-1. Back in the days of the Soviet Union, the government owned
and operated most of the enterprises in the economy. Most prices were set by central planners,
rather than by supply and demand, and the success or failure of Soviet enterprises was judged
primarily by how well they met the numerical targets for production, which were set by the
planners. Specify three ways in which the arrangement produced different economic end results
from those in market economies (17, 22 - 23, 27.)
Middle man is the person or company (distributor) between the supplier and consumer. It would
cost a lot of time and money by cutting out the middle man.
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