After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists:
A) this is a vivid example of market and class exploitation by capitalists.
B) this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.
C) the rising price will give an incentive for firms to ship fewer electric generators to the disaster area.
D) the increase in demand for electric generators should technically cause the price to fall after a hurricane.

Question

Quizplus · Accepted Answer

The increase in price serves as a signal to those in the disaster area to only use electric generators for high-value uses, such as medical equipment, rather than using them for low-value uses, such as gaming consoles. This helps ensure that those with the highest need for electricity have access to it. Additionally, the higher price incentivizes producers to increase the supply of generators to the affected area, increasing availability to those who need it most.

After a Hurricane Knocks Out Power to Thousands of Households