Final answer:
Given the context of chronic shortages in the prescription drug market, it suggests low supply is the cause. Understanding market dynamics through examples such as the gasoline market helps explain how prices shift towards equilibrium. Economists use the ceteris paribus assumption to isolate variables and better understand market relationships.
Step-by-step explanation:
To determine the effect of various factors on the market for prescription drugs, we can look at the market dynamics of supply and demand. If there are chronic shortages in the market, it suggests that at the current price level, the quantity demanded exceeds the quantity supplied. This can be due to high demand for prescription drugs or low supply. Given the options, the most logical completion of the sentence would be that the supply of prescription drugs is low, therefore leading to the chronic shortages.
Using the gasoline market example, if the price of gasoline is set above the equilibrium price, the quantity demanded would likely be lower, and the quantity supplied would be higher than at the equilibrium price. This scenario usually leads to a surplus in the market. Conversely, when the price is set below the equilibrium price, there is excess demand, or a shortage, where the quantity demanded is greater than the quantity supplied, prompting the price to rise toward the equilibrium level.
The ceteris paribus assumption is used by economists to examine the effect of one variable on another while holding all other variables constant. This allows for a clearer understanding of the relationship between specific market forces.
Regarding changes in the market for paint:
- Cost-saving inventions in paint technology will likely increase the supply of paint, due to decreased production costs.
- If paint is lasting longer, the demand for paint may decrease as property owners will not need to repaint as often.