ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Buyers and sellers are unable to agree on a price
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laws prevent stores from responding in time to prevent it
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manufacturers charge higher prices than stores can pay
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demand goes up so fast-time is needed for Quantity Supplied and Price to adjust
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Detailed explanation-1: -Why do fads often lead to shortages, at least in the short term? Demand increases so quickly and unexpectedly that time is needed for the quantity supplied and price to increase to reach a new equilibrium point.
Detailed explanation-2: -Therefore, shortage drives price up. If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.
Detailed explanation-3: -A shortage is a condition where the quantity demanded is greater than the quantity supplied at the market price. There are three main causes of shortage-increase in demand, decrease in supply, and government intervention. Shortage, as it is used in economics, should not be confused with “scarcity."
Detailed explanation-4: -A shortage exists if the quantity of a good or service demanded exceeds the quantity supplied at the current price; it causes upward pressure on price. An increase in demand, all other things unchanged, will cause the equilibrium price to rise; quantity supplied will increase.