Assume a market initially exhibits a shortage.Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium?

Question

Quizplus · Accepted Answer

If the market initially exhibits a shortage, that means at the existing price, quantity demanded exceeds quantity supplied. In response, the price will rise, which will encourage firms to increase supply and consumers to reduce demand. This process will continue until the market reaches an equilibrium price and quantity where quantity supplied equals quantity demanded. Therefore, after the market adjusts to equilibrium, quantity supplied will increase.

Assume a Market Initially Exhibits a Shortage