How do price adjustments eliminate a shortage?
A) As price rises, quantity demanded decreases and quantity supplied increases.
B) As price rises, quantity demanded increases and quantity supplied decreases.
C) As price falls, quantity demanded decreases and quantity supplied increases.
D) As price falls, quantity demanded increases and quantity supplied decreases.
E) As price falls, quantity demanded increases and quantity supplied increases.

Question

Quizplus · Accepted Answer

When there is a shortage, demand exceeds supply. By raising the price, the quantity demanded decreases while the quantity supplied increases. This brings the market towards equilibrium where the quantity demanded equals the quantity supplied, thereby eliminating the shortage.

How Do Price Adjustments Eliminate a Shortage