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I don't think the issue is elastic versus inelastic goods. The issue is the barrier to entry in the market. If water bottles were selling for 20 dollars each,
by ImSkeptical 9y ago
I don't think the issue is elastic versus inelastic goods. The issue is the barrier to entry in the market.
If water bottles were selling for 20 dollars each, and I were in an unaffected but relatively nearby area, I might load my truck with a couple thousand water bottles that I buy for 50 cents, drive for a day, and enjoy a big return. In this way, the market is extremely useful. People like me are motivated by profit incentives to move the resources that people in the disaster area need to them. This is because the water bottle market has a very low cost to enter.
Conversely, the airline market has a very high cost to enter. Even if I would like to take advantage of high prices, I can't get myself a passenger plane, necessary permits, agreements with airports, etc, in time to do anything about the hurricane. On the other hand, people with small private planes may be able to fly their planes down, and take on passengers, in a profitable way, and that may be an incentive for more of them to do so than would otherwise.
- maxerickson 9y agoSome fun context: Walmart is selling water at normal prices and shipping it in from distribution centers as far away as Nevada.