Abstract

The price of food increased 2.6% in April, the largest single-month increase since 1974, but food industry executives are insisting that the country has enough food. So why are prices going up?

The explanation provided by the industry is that consumers are buying more than they need, creating shortages.

But a shortage is not a good excuse for increasing prices. Contrary to what you might have learned in Econ 101, there’s only one reason for which a shortage should give rise to higher prices: profiteering, as I explain in a forthcoming law review article.

If shortage were the only explanation for these price increases, then the increases would need to be condemned.

Document Type

Commentary

Publication Date

6-2-2020

Notes/Citation Information

Ramsi A. Woodcock, The Economics of Shortages, Law and Political Economy Blog (June 2, 2020), at https://lpeproject.org/blog/the-economics-of-shortages/.

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