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QUESTION:

11. Disequilibrium

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

ANSWER:

Suppose the market for trucks is unregulated. In other words, the price of trucks can adjust freely based on supply and demand forces.
If a shortage exists in the truck market, then the current price must belower  Correct than the equilibrium price. For equilibrium to be reached in the market, you would expectbuyers to offer higher prices  Correct .
Points:
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Explanation:
Prices below the equilibrium price generate excess demand because buyers are willing to purchase more trucks than sellers are willing to sell—the quantity supplied is less than the quantity demanded at that price. Some buyers who wish to purchase trucks at the current price will be unable to do so. In order to purchase trucks, some buyers will offer higher prices. As buyers bid and drive prices upward, some sellers will be willing to sell additional trucks. Therefore, the market will move toward the equilibrium price, where the quantity of trucks demanded by buyers equals the quantity supplied by sellers.


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