After a major ice storm left 90,000 New York utility customers without power in January 1998, generators that normally sold for $500 were being sold for as much as $3,000. New York law prohibits raising pricesfor necessities in emergency situations. Elevated prices prompted the State Attorney's office to promise to prosecute price gougers.
a. Explain how this law prevents markets from clearing. Does it create a price floor or a price ceiling?
b. How might antiprice gouging legislation actually work to keep people cold longer?

Question

After a major ice storm left 90,000 New York utility customers without power in January 1998, generators that normally sold for $500 were being sold for as much as $3,000. New York law prohibits raising pricesfor necessities in emergency situations. Elevated prices prompted the State Attorney's office to promise to prosecute price gougers.
a. Explain how this law prevents markets from clearing. Does it create a price floor or a price ceiling?
 b. How might antiprice gouging legislation actually work to keep people cold longer?

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The Answer of After a major ice storm left 90,000 New York utility customers without power in January 1998, generators that normally sold for $500 were being sold for as much as $3,000. New York law prohibits raising pricesfor necessities in emergency situations. Elevated prices prompted the State Attorney's office to promise to prosecute price gougers.
a. Explain how this law prevents markets from clearing. Does it create a price floor or a price ceiling?
 b. How might antiprice gouging legislation actually work to keep people cold longer?

After a Major Ice Storm Left 90,000 New York Utility