Please read this article by Michael Munger which talks about ice, hurricane Sandy and the information function of prices in markets. There are some really interesting normative questions here, but for now I'd like you to focus on the positive economics you've learned from the model of supply and demand, equilibrium, and the role of price floors and ceilings.
I want to add the following assumptions to the story (or at least make them explicit).
There are 1499 people who show up to buy bags of ice from one of the trucks.
Each person wants to buy one bag of ice. The highest reservation price is $14.99, the next-highest reservation price is $14.98, and so on (it falls by one cent per person). The demand schedule looks like this...
$ 14.99 1
$ 14.98 2
$ 14.97 3
$ 14.96 4
$ 14.95 5
$ 10.00 500
$ 0.01 1499
There are 500 bags of ice for sale.
Suppose you are the police officers and you have dutifully done your job arresting the ice dealers. Now suppose that you decide to distribute the ice. Keeping in mind that this is an emergency and time is of the essence, how do you decide who gets the ice? Do you charge a price? What price do you charge? What would you do if some of the people you gave or sold the ice to decided to re-sell it at higher prices?
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As the supply of the ice in this situation is 500 bags and time is of essence, the person who price a price of $10 and takes the whole of 500 bags gets the ice. Yes there is a price charged for the ice sold in this situation and the price charged is $10. And since the person who takes 500 bags...
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