One way that companies can reduce supply without customers realizing it is by changing the size of the packaging. This actually makes the per unit price higher, which matches with the theory of decreasing supply. This decrease in supply could come from changes in input prices or perhaps shifts in agricultural markets, like freezes in Florida and oranges.
While trying to spy on a local fish accident, Dee has an accident that causes the business to shut down for a bit. This reduction in supply is shown later when Dennis, Mac, and Charlie go to a restaurant for lunch and intend to order fish. Because of the reduction in supply, the market price for snapper has gone up to $44, but the guys buy the fish anyway since they are charging it to Frank’s card.
Thanks to Maggie Sciabica for the reference!
Forrest easily enters the shrimp market by buying a boat. There are multiple buyers and sellers, and no one shrimping boat controls the price of shrimp. Therefore the shrimp market is an example of perfect competition. Once the hurricane hits it forces all the other boats to exit the market. Turning the market into a monopoly. Forrest is the sole supplier of the product, controlling the entire market, turning it into a monopoly.
Thanks for the clip and summary Keagan Rallis
Is price gouging evil or is it the sensible economic decision when shortages arise? In this series, John Stossel explores price gouging around natural disasters. This topic is really good for discussing the tradeoff between equity and efficiency.