question archive When prices of a good are not allowed to bring demand and supply to equilibrium, mechanisms used to allocate resources are what?
When prices of a good are not allowed to bring demand and supply to equilibrium, mechanisms used to allocate resources are what?
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When prices of a good are not allowed to bring demand and supply to equilibrium, mechanisms used to allocate resources are what?
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- If there is an excess supply in the market, as in case there is a binding price floor from government that leads to quantity supplied exceeds the quantity demanded, sellers are unable to sell all the products produced at the market price. Sellers may appeal the personal bias of the buyers, probably based on racial or familial ties, to sell the amount of good that they desire.
- If there is an excess demand in the market, as in case there is a binding price ceiling from government that leads to the shortage of good where quantity demand exceeds the quantity supplied, sellers then can develop the methods such as rationing the good; special treatment for favored customer based on the personal bias; queuing/waiting in line to buy the good or black market (illegal market).
