If a shortage exists for a good in a free-market economy,the:
A)Price of the good will rise.
B)Price of the good will fall.
C)Government will order suppliers to increase the production of that good.
D)Government must establish a rationing system to make sure that the good is fairly distributed.

Question

Quizplus · Accepted Answer

In a free-market economy, the price of a good is determined by the interaction of supply and demand. If there is a shortage of a good, demand for the good will exceed supply, and suppliers will be able to charge a higher price. This higher price serves as an incentive for suppliers to produce more of the good, which can eventually alleviate the shortage. Therefore, the price of the good will rise.

If a Shortage Exists for a Good in a Free-Market