Question

Briefly explain and illustrate whether the following statement is true or false: ‘When there is a shortage of a good, consumers eventually give up trying to buy it, so the demand for the good declines, and the price falls until the market is finally in equilibrium’.

Answer 1

False

First of all it should be understood that when there is shortage in the market it means the quantity demanded is greater than the quantity supply

if there is excess quantity demanded as compared to supply it means there is lot of demand of goods or services in the market

But this is not beneficial for a good market operation and due to this more demand there is pressure on price

The supply is limited so price is increased until it's finally reaches to equilibrium

There is no reason like consumer eventually give up trying to buy it