Prices serve a rationing function. When quantity demanded exceeds quantity supplied, prices rise to alleviate the shortage. When quantity supplied exceeds quantity demanded, prices fall to alleviate the surplus. However, when prices are inflexible, shortages and surpluses persist. Other rationing mechanisms must develop.

Using demand and supply analysis, describe a specific situation that you have witnessed where a shortage occurred. Why were prices unable to adjust in this market?

Combining what you learned from your readings as well as from the video clip, what other rationing functions could develop to alleviate that shortage?

Use this transcript below to awnser the question:

ECO 202 Jingle All the Way Transcript [Tom Petty's "Christmas All Over Again" plays] Well it's Christmastime again. Decorations are all hung by the fire. Everybody's singing... Store Manager: Listen up, people. To answer your first question-- yes. The rumors are true. We have received a small quantity of the action figure known as Turbo Man. [everyone cheers] I am not gonna ask you people to be quiet again. Do you hear me? Now, here's how things are gonna work. You will form an orderly line so that an employee can hand you a numbered ball. These balls will then be drawn in a standard lottery fashion to see who gets a doll. If you're not one of the lucky few, we have plenty of Turbo Man's faithful pet tiger Booster in stock. Mailman: We don't want it. Store Manager: And by the way, in accordance with the laws of supply and demand, the new list price on each figure just doubled. Mailman: What? Customer: That's against the law, buddy! [overlapping shouting] Hey, give me a ball! [Johnny Mathis' "It's The Most Wonderful Time Of The Year" plays] It's the most wonderful time of the year. With the kids jingle-belling and everyone telling you be of good cheer. It's the most wonderful time, it's the most wonderful time, of the year. Howard: I got it! I got it! Aah