When there is a shortage I. there is a tendency for price to increase.
II. there is an excess quantity demanded.
A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question

Quizplus · Accepted Answer

When there is a shortage, the quantity demanded exceeds the quantity supplied at the current price, which creates competition among buyers leading to an increase in price (I). This increase in price incentivizes suppliers to supply more, but it also discourages buyers from demanding as much, and thus reduces the excess quantity demanded (II). Therefore, both I and II are true.

When There Is a Shortage I