Consumer advocate: Economists reason that price gouging-increasing the price of goods when no alternative seller is a...

shunhe on August 4, 2020

Hi @hfatima1,

Thanks for the question! So let’s break down this stimulus first. We’re told that economists think that price gouging is efficient since people with a higher willingness to pay (WTP) will get the goods, and those people’s higher WTP is supposed to show that they need those goods more. But, says the author, WTP isn’t proportional to need; in the real world, some people can’t pay as much as others. Thus, price increases allocate goods to the people with the most money, not the people with the most need.

As for the conclusion, I’d say that the conclusion here isn’t explicitly stated, but to sum it up, I’d basically say that the conclusion is that “those economists are wrong.” Because the structure is basically: Economists say X because Y. But Y is a bad reason.

As to why (B) is wrong, the fact that WTP isn’t proportional to need isn’t the conclusion; it’s just a premise. After all, nothing really supports it, it’s just kind of asserted. And that’s how we know it’s a premise. It goes on to support the main conclusion. (E) is going to be correct here because what it does is deny a claim (about how WTP shows that you really need the goods) that the argument takes to be assumed in the reasoning (by the economists) that it rejects.

Hope this helps! Feel free to ask any other questions that you might have.