Question

Suppose the market for pizzas is unregulated. That is, pizza prices are free to adjust based on the forces of supply and demand.If a shortage exists in the pizza market, then the current price must be (higher/lower) than the equilibrium price. For the market to reach equilibrium, you would expect (sellers to offer lower prices/buyers to offer higher prices/persistent excess demand).

Answer 1

Answer:

If a shortage exists in the pizza market, then the current price must be HIGHER than the equilibrium price. For the market to reach equilibrium, you would expect BUYERS TO OFFER HIGHER PRICES persistent excess demand.

Explanation:

The market for pizzas is unregulated, there is no law that establishes the minimum or maximum price of a slice.

A sudden decrease in the quantity supplied of a product or service will shift the supply curve to the left causing a shortage. The only way a shortage is eliminated is through an increase in the price of the good or service. That will increase the equilibrium price, which in turn should increase the quantity supplied.

Answer 2

Answer:

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

Explanation:

Prices below the equilibrium price generate excess demand because buyers are willing to purchase more pizzas than sellers are willing to sell—the quantity supplied is less than the quantity demanded at that price. Some buyers who wish to purchase pizzas at the current price will be unable to do so. In order to purchase pizzas, some buyers will offer higher prices. As buyers bid and drive prices upward, some sellers will be willing to sell additional pizzas. Therefore, the market will move toward the equilibrium price, where the quantity of pizzas demanded by buyers equals the quantity supplied by sellers.