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In the News

European Central Bank investigates "greedflation"

Graham Watson

5th March 2023

The ECB has announced that it will be look out for instances of price gouging and the possibility of EU firms using the current inflationary environment to increase their profit margins, exploiting consumers.

Apparently this stems from some research shown to the ECB council suggesting that corporate profit margins have increased by 25% at a time when ordinarily we'd expect them to be shrinking.

Were they to do so, it would slow the rate at which inflation falls, although quite what the ECB can do about this is another matter.

Please read: ECB looking out for price gouging as fears grow over ‘greedflation’

What is price gouging?

Price gouging refers to the practice of charging excessive or unreasonable prices for goods or services in response to a situation of increased demand or limited supply, such as during a natural disaster, pandemic, or other emergency.

In such situations, the demand for certain goods or services may increase dramatically, and the supply may be constrained, leading to scarcity and higher prices. Price gouging occurs when sellers take advantage of this situation by charging prices that are much higher than what would be considered reasonable under normal market conditions.

Price gouging can take many forms, such as charging exorbitant prices for food, water, fuel, or other essentials during a disaster or crisis. It can also occur in markets for medical supplies or other goods that are in high demand during a public health emergency.

Price gouging is generally considered unethical and may be illegal in some jurisdictions. Many countries have laws that prohibit price gouging during emergencies, and violators may face fines or other penalties. The rationale behind such laws is to prevent sellers from taking advantage of vulnerable consumers during times of crisis and to promote fairness and equity in markets.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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