I need help.

We had to read the following piece

http://www.cnn.com/2004/LAW/08/17/charley.gouging.charges/index.html

Florida Lawsuits Allege Price Gouging

Then we had to comment on which Graph best describes the situation and list two keywords relative to the situation

Following is my discussion post and what the professor send back. I am at a loss on how to answer. I really don't understand.

ME: The first article, Florida lawsuits allege price gauging, discusses the price gouging on hotel rooms that happened in 2004 in Florida after hurricane Charlie hit. As a result, more than 1200 complaints were filed because the Florida statute obligates that prices for necessities remain at the average price it has been for the last 30 days (Phillips, 2004, para. 13). Graph D explains the situation best, as there is a decrease in the supply, which results in higher prices. My conclusion is that whenever there is a SHORTAGE of an item that is in demand, especially during a natural disaster, price gouging will occur. Price gouging is not a good thing and leads to people hoarding supplies, hence many not having access to the specific item. I believe controlling the DEMAND CURVE by putting restrictions on how many of an in-demand item a person can buy will prevent price gouging.

PROFESSOR: Good participation post.How can you tell that there is a shortage of a product?Please explain.

In relation to a "demand curve," it's a graph that shows how price and quantity demanded are related.However, you refer to limiting the amount people would like to buy.Following the "demand curve", are you suggesting to increase the price, so the quantity demanded can go down?Please clarify. Which determinant of supply can explain graph D?Why?

ME: When consumers cannot find/buy all they want of a product at the going rates, it tells you there is a SHORTAGE of that particular product. Likewise, during a natural disaster/pandemic, laws that prohibit price gouging will leave providers without the incentive to acquire and deliver items that are in need and that consumers are willing to pay more for; the consequence would also be a SHORTAGE of essential products.

Concerning the demand curve, I am not suggesting raising prices to decrease the demand. On the contrary, I am trying to convey that to keep the DEMAND CURVE somewhat stable, not shifting too much to the right by a change that increases the quantity at every price, restrictions should be put on in-demand items; similar to the restrictions on certain products during the Covid pandemic.

I believe that the Relative Price of Alternative Outputs best explains graph D because the suppliers (hotel owners) could bring the same product (hotel rooms) to the market at an increased price due to the high demand.

PROFESSOR: Thank you for your good response. If you don't want to demand to shift to the right (increase), you suggest to limit the quantities available per person, right?Well, that is not an illustration of the "law of demand", which states that price and quantity demanded are inversely related (price goes up, quantity demanded goes down and vice versa).In other words, the only way that quantity demanded can decrease using the "law of demand" would be by increasing the price.Aren't you suggesting something else instead?Please review carefully.Hint: it's all about the "shortage." You suggest that graph D can be caused by "relative price of alternative outputs."You should add "change in" before that and specifiy the kind of change (increase or decrease).Alternative outputs refers to, for example, a pizza producer decides to produce more lasagna because its price increases and it becomes more profitable than pizza.Are you suggesing the producers of hotel rooms decided to produce more hotel rooms because ... what else changed?Please review carefully and resubmit or select another determinant (or graph).

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