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Author Question: Explain how the price system eliminates a shortage. What will be an ideal ... (Read 18 times)

abarnes

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on: Jun 29, 2018
Explain how the price system eliminates a shortage.
 
  What will be an ideal response?

Question 2

What are some of the problems that exist with a laissez-faire economy?
 
  What will be an ideal response?


joanwhite

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Reply #1 on: Jun 29, 2018
Answer to Question 1

A shortage means that quantity demanded is greater than quantity supplied. This will lead to upward pressure on price. As price rises, quantity demanded falls and quantity supplied rises. This will continue until quantity demanded is equal to quantity supplied.

Answer to Question 2

Free markets may not always produce the goods and services that people want at the lowest cost. They are not always efficient. Also, income may be distributed unequally.


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