In the long run if there is a shortage in the market for a product,the guiding (allocation)function of price can be expected to cause
A)an increasing shift in the demand for the product.
B)a decreasing shift in the demand for the product.
C)an increasing shift in the supply of the product.
D)a decreasing shift in the supply of the product.

Question

Quizplus · Accepted Answer

When there is a shortage in the market for a product, the price of the product tends to rise. This increase in price serves as a signal to producers, who respond by increasing the supply of the product. Therefore, the guiding function of price in this situation would cause an increasing shift in the supply of the product.

In the Long Run If There Is a Shortage in the Market