When there are product shortages due to too low a supply, an equilibrium point will be reached if
A) consumer demand further expands.
B) consumers bid up prices.
C) sellers reduce prices.
D) competitors leave the market.

Question

Quizplus · Accepted Answer

When there are product shortages due to too low a supply, an equilibrium point can be reached if consumers bid up prices. This is because higher prices can lead to an increase in supply (as sellers are more incentivized to produce or sell more) and a decrease in demand (as some consumers may no longer be willing or able to purchase the product at higher prices), moving the market towards equilibrium.

When There Are Product Shortages Due to Too Low a Supply