Question

Choose all answers that are correct: When economists speak of a shortage​, they mean a situation in which

I. The market price is temporarily "stuck" above the equilibrium price

II. The market price is temporarily "stuck" below the equilibrium price

III. The quantity demanded exceeds quantity supplied

IV. The quantity supplied exceeds quantity demanded

Group of answer choices

a.I and III

b.II and IV

c.II and III

d.I and IV

Answer 1

Option C.

• When the market price is set below the equilibrium level then the quantity demanded Increases to a greater extent.
• This will create a shortage within the market as quantity demanded exceeds the quantity supplied.
• This is because when price decreases, more people are keen to purchase goods and services at lower prices.
• As more people come forward to purchase, the producers will face shortages as the amount they supply would be less than the current demand.