Inflation is the sustained increase in the general level of prices for goods and services. On the other hand, price gouging is when prices are raised to an unnatural level during a state of emergency. So, what’s the difference between inflation and price gouging? Keep reading to find out!
Difference between Inflation and Price Gouging
The difference between inflation and price gouging is that inflation is the “price change due to devaluation of the currency,” and price gouging is the “sudden price increase in an attempt to keep the product on the shelf during panic demand” [Source]. Inflation might not affect the availability of products, but price gouging only makes the product available to those who can afford it. Price changes under inflation are controlled by the economic trend, while price gouging is entirely an act by firms and producers to hike prices. Inflation experiences price increases because of the currency’s value, while producers do price gouging to maximize their profits. These firms tend to hide behind the effects of inflation and blame it for gouging prices. Price gouging is based on exploiting the imbalance between supply/demand, and it is described as an unethical move. It can be controlled by ensuring that producers are not taking advantage of consumers with hiked prices, and inflation can be reduced by making economic moves that affect the whole economy.
How much Inflation is Price Gouging?
According to economists, the tolerable level of inflation should be at 2% or below, and anything above this is a red flag for producers and consumers. Inflation becomes price gouging when the seller increases the prices of goods or services to a level considered higher than the normal one [Source].
Is Inflation being caused by Price Gouging?
Inflation can be caused by price gouging since this greediness by corporates is driving the economy [Source]. Corporates’ hiked prices tend to influence other economic players to adopt those prices to maximize their profits and make more money from consumers. Gouged prices are not reduced, so they become the new norm and are adopted into the economy, and they direct influence inflation.
Food Price Gouging
Food price gouging entails sellers increasing food prices over the considered level, which enables customers to buy more without straining their budget. Businesses that sell foods know that their market is always full of customers because food is a basic product needed by humans every day. Due to this, they try to make more profits by engaging in food price gouging, and people are then forced to buy expensive food to feed their families daily. Food price gouging is an act done by the producers, suppliers, and retailers of food. Food price gouging usually triggers an increase in prices of all the other products because prices evolve around people being able to feed themselves.
Alternative Word for Price Gouging
An alternative word for price gouging is profiteering [Source].
Benefits of Price Gouging
The benefits of price gouging include firms, producers, and suppliers making a lot of profits from the high prices charged for products and services. These entities can increase production by hiring more labor and expanding their branches. It is also beneficial to the customers as demand usually decreases when prices are high so that the few wealthy customers can purchase their commodities without any hustle. Price gouging also reduces panic buying or bulk buying and ensures the availability of products and essential services [Source].
Can you get in trouble for Price Gouging?
Regarding price gouging, sellers might have to adhere to the maximum average price of particular products or services in a locality. Going over the limit might be a crime leading to the closure of a corporate. Generally, prices differ depending on the locality one buys from, so some other areas do not have price limits. For instance, in Texas, the office of the Attorney General has the authority to prosecute businesses that engage in price gouging since it is illegal, especially after a disaster has been declared by the governor or president [Source]. In dictatorship countries, ruling governments are responsible for price control, so that that price gouging will get you into trouble.
Can I Report Price Gouging?
People can report price gouging, depending on the locality’s rules. For example, Texans are encouraged to report price gouging acts by businesses when the governor or president has declared a disaster. Americans are also informed of the processes of reporting price gouging to the Attorney General [Source]. In reporting price gouging, one ought to have the name of the store or vendor where they saw an overpriced item and the address, the item’s details such as type and brand, date and time where one saw the item, and might even provide a picture of the item.
Cheaper than Dirt Price Gouging Response
The Texas Attorney General’s office identified over 4 000 sales that involved price gouging at Cheaper Than Dirt and ordered it to pay $402 786 in refunds to consumers [Source].
