How does shortage of goods and services exploit the consumers?

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readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted on

The basic law that works here is the law of supply and demand. If the demand is great and there is a lot of supply, then prices will be pretty low. For example, demand for corn products is great and there is a lot of corn in America. So, costs are low. If demand is great and there is a lack of supply, then prices will be high. And the greater the demand, the greater the price. For example, when Apple first announced the iphone, they did not make enough and the demand was great. So, prices went through the roof!

Based on the above law of supply and demand, let's now talk of exploitation of the consumer. The most obvious way for companies to exploit consumer is by deliberately withholding supplies to raise prices. Another way we see this is through monopolies. If a company completely takes over a field, then it can charge as much as it wants. It controls supply completely. In this way, the customer is at the mercy of that company. Finally, here is another variation. Some companies give a product at a very low price to make customers addicted only to raise prices in the end.

akannan's profile pic

Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

Posted on

I think that there are a couple of elements that have to be integrated into a discussion of this question.  The first is that the question might be making the presumption that there is a deliberate shortage of goods and services.  Certainly, if there is a conscious withholding of goods and services in order to drive up costs and demand, consumers are being exploited to pay higher prices for products in an artificial manner.  In this, there is exploitation because those in the position of power are able to manipulate the marketplace in order to satisfy their own self interest.  However, a shortage of goods that occurs in the natural ebb and flow of the marketplace might not be exploitation as much as economic reality.  Consider the basic laws of supply and demand in this situation:

If demand increases and supply remains unchanged then higher equilibrium price and quantity....If supply decreases and demand remains the same then higher price and lower quantity.

It is in these two areas where the law of supply and demand speaks to economic reality.  If demand increases with supply not following, there is struggle for the consumer.  If supply decreases while demand is still present, there is still struggle for the consumer. In either case, I am not certain there is exploitation present as much as a condition of economic reality.

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