Can We Pretend That Airplanes In The Night Sky Are Like Not So Flipping Expensive?

       So if we've learned one thing in economics, it's supply and demand. Honestly even if you've never taken economics, you've probably run into this phrase countless times in your life. At least of few of those times it was being used incorrectly I'm sure, but whatever your background, you probably have at least some understanding of supply and demand. There's a bunch of stuff involved with supply and demand (which is of course part of why it's so ubiquitous), but for this blog's purposes, we'll reiterate how they affect each other directly: if demand is high, supply will go up because people want to sell things that people want to buy. And the inverse is true as well. Then of course the stuff with price applies to how supply and demand go up: the same increases and decreases caused by changes in supply and demand apply when they are looked at together. But we all know that, right?

This is first grade stuff, guys. 

   So if something is in high demand, prices are higher. But sometimes demand rises sharply and either unexpectedly or with no remedy. For example, right now demand and price for Diet Coke is pretty reasonable, right? Sure people want it and the companies make a tidy little profit on it, but it's not one of life's essentials (to the average person, unless you're me), it's not very scarce,  there are substitutes, so the price is reasonable and consistent. Again, this doesn't apply to me because I would pay crazy amounts for Diet Coke because I need it to function and no, Pepsi is not okay.

Actual picture of me without caffeine.

So, Diet Coke is amazing but not amazing enough for most to pay exorbitant prices for it. However, let's say that suddenly there is an alien invasion, and we discover that their only weakness is Diet Coke. 

Yeah how's that for a twist, M. Night Shyamalan?

So of course Diet Coke would be readily available, cheap or even free as humanity's only chance against impending doom, correct? 

Lol, no, but I admire your optimism. If we've learned another thing from economics its that people are pretty unlikely to sit around braiding each other's hair and singing Kumbaya if there's money to be made. And if Diet Coke suddenly became an essential weapon, demand would be pretty high and purchase would be pretty much unavoidable, which means that suddenly anyone with Diet Coke to sell can sell it at crazy high prices. This is called price gouging, which is defined as prices being raised in an effort to exploit demand. 

The Diet Coke thing may seem like an extreme example, and it may seem like this is a process that doesn't really happen, but price gouging extends far beyond the realm of theoretical alien invasion. The airline industry is one of the worst offenders of price gouging, and rather than coming on unexpectedly like an alien invasion, airlines' price gouging occurs yearly. And, even more crazily, we buy into it every single year. 

Wipe that smile off your face you smug, capitalist puppet. 

Basically, airlines know that around the major Western holidays (Thanksgiving, Christmas) a lot of people are trying to travel. So the airlines take full advantage of this and charge crazy high prices. Now, obviously if a price is too high we can decide not to buy plane tickets, but the problem with price gouging is that it isn't an arbitrary raise in prices, it stems from demand. The demand is still there no matter the price, because for so many people these are the only times of year they can get off from work or school. People also want to spend time with family during these family-based holidays. Knowing this, airlines can hike their prices and not expect too many people to choose not to travel, because Todd still has to come home from college for the week and Aunt Betty will be hurt if you don't come out to Boca to have your share of her pumpkin pie and cat stories. 

She's not mad, she's just disappointed.

So, is it moral for companies to raise their prices to exploit high demand? Probably not. But the thing about economics is that morality can be pretty subjective, while money is pretty easy to quantify. This is why, in mixed economies, the government often intervenes with measures like price ceilings so that prices can't be too exploitative. Free market supporters argue that the market will fix itself in these situations and that eventually price will exceed what people are willing to pay and be brought back down to encourage consumer spending. Well, I think that these free market supporters have never had to deal with a disappointed Aunt Betty.