Costs of cleaning up disasters, supply and demand
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When disasters hit an area, the cost of everything seems to go up immediately: food, water, housing, gas and so forth. Explain why this phenomenon may actually be a good thing, using the laws of supply and demand to explain your answer.
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Solution Summary
This solution discusses the phenomenon of rising costs following a disaster in a region. It explains how this is not just due to merchants raising their prices to take advantage of the situation, but can be explained by the principles of supply and demand, and how this can actually be a good thing for those living in the area.
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When a disaster hits an area, much of the infrastructure can be hurt or destroyed, such as the local gas stations or stores. Supply and demand laws show that demand will be higher than supply if this occurs. For instance, the grocery store gets hit; everyone nearby needs bread and milk, but the store will not be able to get any, so the prices of those items will rise. This is consistent with the principles of supply and demand: everyone ...
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