With the aid of an appropriate diagram: Florida like several other state, has passed a law that prohibits price gouging immediately before, during, or after the declaration of a state of emergency. Price gouging is definded as selling necessary commodities such as food, gas, ice, oil, and lumber at a price that grossly exceeds the average selling price for the 30 days price to the emergency. Many consumers attempt to stock up on emergency supplies, such as bottled water, immediately before and after a hurricane or other natural disaster hits an area. Also, many supply shipments to retailer are interrupted during a natural disaster.

(a) Assuming that the law is strictly enforced, what are the economic effects of the price gouging statute?

(b)What is the laws of demand and supply, and identify what factors that cause demand and supply to shift?

(c)Explain what price determination in a competitive market, and show how equilibrium changes in response to changes in determinants of demand and supply? Apply supply and demand analysis as a qualitative forecasting tool to see the big picture in competitive market.