(individual) A severe hurricane passing through a populated area will blow out a lot of windows and thereby cause a huge increase in demand for the services of glaziers. If glaziers respond by raising their hourly rates, the cost to homeowners of having their windows repaired will rise. But does a hurricane raise the cost to glaziers of repairing windows? Or are glaziers who raise their rates merely taking unfair advantage of the situation? The following questions might help you to think the issue through.
- Why are glaziers able to raise their prices?
Glaziers can raise prices because the amount demanded has risen.
- Who is likely to put the most pressure on glaziers to raise their prices?
People with broken windows. They will be willing to pay more to get their windows fixed first (presumably because the monetary and non-monetary costs of broken windows grow the longer the windows remain broken).
- In what ways will glaziers experience marginal opportunity costs?
They leave money on the table by not taking the extra money.
- Why might glaziers be reluctant to raise prices?
Because alternatives become more attractive. People might switch to unbreakable plastic windows, and the next hurricane then has no broken windows to fix.
- What might a glazier do to raise prices without angering people in the community?
Charge for the spot in line (which is really what they are paying for anyway) but not the "labor" or "materials" other than "at cost." If folks were willing to wait forever, the prices would never rise as there is plenty of supply over time. There's just not that much supply available exactly when they want it.
- In what ways will rising prices make more glazier services available to people in the community?
By attracting more glaziers to the area (and thus increasing the amount supplied).