Question

Suppose the market for cars is unregulated. That is, car prices are free to adjust based on the forces of supply and demand. If a shortage exists in the car market, then the current price must be than the equilibrium price. For the market to reach equilibrium, you would expect________________.

Answer 1

This question is incomplete. The complete question should be:

Suppose the market for cars is unregulated. That is, car prices are free to adjust based on the forces of supply and demand.

If a shortage exists in the car market, then the current price must be ____ than the equilibrium price. For the market to reach equilibrium, you would expect ______.

Answer:

If a shortage exists in the car market, then the current price must be lower than the equilibrium price. For the market to reach equilibrium, you would expect buyers to pay higher prices.

Explanation:

When demand is equal to supply in a market, the the market is said to be at equilibrium.

In a market for cars, the equilibrium price is the price at which cars are sold when demand for cars equals the supply of cars into the market.

If the price of cars in the market drops lower than the equilibrium price, then there will be an increase in demand for cars. Without a corresponding increase in supply of cars, the market will experience a shortage of cars.

For the market to reach equilibrium, prices will have to rise and car buyers will have to pay higher prices.