DECA Marketing Cluster Practice Exam

What commonly leads to the practice of price gouging?

1. Stable market conditions

2. Increased consumer trust

3. Supply shortages following disasters

4. Discount promotion periods

The correct answer is: Supply shortages following disasters

Price gouging typically occurs when there is a significant imbalance between supply and demand, particularly in the wake of emergencies or disasters. When a disaster strikes, it often results in supply shortages for essential goods like food, water, fuel, and medical supplies. As the availability of these crucial items decreases, sellers may take advantage of the situation by significantly raising prices. This practice is often condemned because it exploits consumers who are in desperate need of these products during critical times. In contrast, stable market conditions would not prompt price gouging, as there is a consistent balance between supply and demand. Increased consumer trust is not a factor in price gouging either; trust would generally lead to fair pricing rather than exploitation. Similarly, discount promotion periods are intended to encourage sales through lower prices rather than inflate them, which contradicts the concept of gouging. Thus, supply shortages following disasters create the environment conducive to price gouging, making it the right choice.