In markets with shortages, businesses have incentives to increase quantity supplied as long as price exceeds marginal costs.

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In a market with shortages, businesses can charge a higher price due to increased demand. This creates an incentive for businesses to increase the quantity supplied to take advantage of the higher price. However, businesses will only continue to increase quantity supplied as long as their marginal costs of production, such as materials or labor, remain lower than the price they can sell their product for.

In Markets with Shortages, Businesses Have Incentives to Increase Quantity