Question
changes in supply or demand are not quickly reflected in prices and short-term imbalances may arise.For example, an unexpected increase in demand may lead to
- changes in supply or demand are not quickly reflected in prices and short-term imbalances may arise.For example, an unexpected increase in demand may lead to temporary shortages.
Prices can also be inflexible in market capitalist economies that are not laissez-fairesystems.In particular, many US states have regulations that prohibit "price gouging" or unsubstantiated price increases when shortages arise.In response, firms tend to maintain prices (even if increases are warranted) in order to prevent fines by state authorities and to avoid upsetting customers.For example, grocery stores could have controlled recent hoarding of some goods (e.g., meat, eggs, and cleaning supplies) by sharply increasing prices, but stores generally maintained prices and rationed the scarce goods.
Would you rather live in a more laissez-fairesystem that could have more variable prices but ample supplies, or would you rather live in a more regulated systems that has more stable prices by occasional shortages of some products?
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