Which of the following is an example of price gouging?

• A. A store dramatically increases the price of bottled water after a natural disaster.
• B. A retailer offers a discount on bread during a holiday sale.
• C. A government sets a maximum price for gasoline below the market equilibrium.
• D. A farmer sells apples at the same price throughout the year.

Answer: (A)

Verified step by step guidance

1. Understand the concept of price gouging: it occurs when sellers increase prices to excessively high levels, especially during emergencies or shortages, exploiting consumers' urgent needs.
2. Identify the scenario where prices are raised dramatically in response to a sudden increase in demand or a crisis, such as a natural disaster.
3. Compare each option to the definition of price gouging: check if the price increase is excessive and linked to an emergency situation.
4. Recognize that offering discounts, setting price ceilings, or maintaining stable prices throughout the year do not constitute price gouging.
5. Conclude that the example where a store dramatically increases the price of bottled water after a natural disaster fits the definition of price gouging.