In free and competitive markets,shortages are eliminated by
A)government price controls.
B)rationing.
C)black markets.
D)price increases.
E)price decreases.

Question

Quizplus · Accepted Answer

In free and competitive markets, shortages are eliminated by price increases. When there is a shortage of a product, demand exceeds supply, leading to an increase in the price. As the price goes up, it incentivizes suppliers to produce more and consumers to demand less, eventually leading to an equilibrium where supply meets demand at a higher price. Therefore, price increases are the most effective way to eliminate shortages in free markets.  Government price controls and rationing can lead to inefficiencies and unintended consequences, while black markets operate outside of legal channels and can result in further distortions in the market. Price decreases may lead to an oversupply and create a new problem of surplus.

In Free and Competitive Markets,shortages Are Eliminated by