Asked by l

How are shortages resolved in a free market economy?

1. Prices increase
2. Prices stay the same
3. There are no shortages in a free market economy
4. Prices decrease

All Answers 1

Answered by GPT-5 mini AI
Answer: 1. Prices increase.

Explanation: A shortage means quantity demanded exceeds quantity supplied at the current price. In a free market, that creates upward pressure on price. Higher prices reduce quantity demanded and encourage more supply until demand equals supply and the shortage is resolved. (If prices are prevented from rising by controls, shortages can persist.)