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Suppose the market for cantaloupes is unregulated
Suppose the market for cantaloupes is unregulated. That is, cantaloupe prices are free to adjust based on the forces of supply and demand.
If a shortage exists in the cantaloupe market, then the current price must be (higher or lower)? than the equilibrium price. For the market to reach equilibrium, you would expect (persistent excess demand, seller to offer lower prices, or buyers to offer higher prices)?
Expert Solution
- If a shortage exists in the cantaloupe 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.
When the price is lower than the equilibrium price, the quantity demanded is greater than the quantity supplied. This situation is referred to as excess demand or shortage. With many consumers chasing a few products, the firms can react to excess demand by hiking the price without losing customers. Under such a situation, the buyers will have to pay a higher price.
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