If a market reflects a shortage and prices are allowed to move:

Question

Quizplus · Accepted Answer

When a market reflects a shortage, the quantity demanded is higher than the quantity supplied. This puts upward pressure on prices, as consumers compete to purchase the limited supply available. Allowing prices to move freely in response to this shortage will lead to an increase in price, as suppliers are incentivized to produce more in order to capture the higher profits. Therefore, the correct answer is that the price will increase (choice D).

If a Market Reflects a Shortage and Prices Are Allowed