Question

What factors will determine the sizes of the​ shortages? The extent of the excess demand implied by the shortages will depend on A. the amount by which quantity supplied exceeds quantity​ demanded, where the shortages will be larger the greater this difference. B. the elasticity of​ supply, where the shortages will be larger if more close substitutes are available. C. the elasticity of​ demand, where the shortages will be larger if demand is more inelastic. D. the amount by which price is set above​ market-clearing levels, where the shortages will be larger the greater this difference. E. the elasticities of supply and​ demand, where the shortages will be larger if both supply and demand are more elastic.

Answer 1

Answer:

The answer is: C) the elasticity of​ demand, where the shortages will be larger if demand is more inelastic.

Explanation:

When the demand for a product is completely inelastic it means that the quantity demanded for that product will be the same whether its price increases or decreases. Rarely any product is completely inelastic, but inelasticity shows a tendency of buyers to keep buying a product even if its price rises, for example gasoline.

Inelastic products don´t follow the law of supply and demand, since the price doesn´t alter the demand.

If suppliers can produce enough goods (product shortages) and the quantity demanded stays the same, the price will rise. But if the demand for the product is inelastic then the shortage will get worse since every time more people will want to buy the product and their will be less product to buy.