This lesson simulates a market for “thingamajigs” before and after a natural disaster like a hurricane, and with and without government-imposed price controls. Students, acting as buyers and sellers, experience the ability of markets to adjust to the increased scarcity caused by the disaster, and how price controls confound those adjustments, resulting in shortages.
Before the disaster - you were behaving like a normal "Law of Demand" situation. Allison and Shelby were doing a great job at keeping prices low to keep the sellers coming back - but being careful that there was a price that was too low. Jackson and Jo did offer prices that were too low that had people rushing to buy - but in real life, they would've ended up bankrupt.
But when the disaster hit - the law of demand changed and a new and now a new curve is needed. People's tastes and preferences and consumer choices changed. We ended up creating a new curve - that at all prices people demanded more thingamajigs. I particularly commend Jazerius and Hattie's team for how quickly they adjusted to the new prices.
Did some people not have enough money? They were squeezed out of the market. Is it fair that survival is based on who has money?
THAT is where Rule of Law can come in and change the market. It brought order and ended the chaos - but there was no real incentive for businesses to get more Thingamajigs. They would lose money with the price control.
So, markets are great in adjusting to changes in the economy - but they are not necessarily fair to everyone.
Great job today, people! I will post winners tomorrow.
Don't forget our quiz on THURSDAY.
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