Question

Suppose the market for almonds is unregulated. In other words, the price of aimonds can adjust freely based on supply and demand forces. If a shortage exists in the almond market, then the current price must be ______ than the equilibrium price. For equilibrium to be reached in the market, you would expect_____.

Answer 1

A shortage in the almond market indicates the current price is lower than the equilibrium price. To achieve market equilibrium, the price is expected to increase until the quantity demanded equals the quantity supplied.

Step-by-step explanation:

If a shortage exists in the almond market, then the current price must be lower than the equilibrium price. For equilibrium to be reached in the market, you would expect the price to increase until the quantity demanded equals the quantity supplied. In a situation of a shortage, there is excess demand; that is, at the given price, the quantity demanded exceeds the quantity supplied. This typically prompts sellers to raise their prices. As the price increases, the quantity of almonds demanded will decrease (according to the law of demand), and the quantity of almonds supplied will increase (according to the law of supply), until the market reaches an equilibrium where the quantity demanded equals the quantity supplied.