Answer to Question #187843 in Microeconomics for Usama

Question

Let’s make a situation that you are working as a firm owner and there is shortage in the market (shortage in terms of the commodity you are producing) then what strategy you will opt to tackle this situation and how to earn maximum profit?

Answer 1

Shortage means that there's a high demand but a lower supply. Therefore the sellers will try to increase their price first and then the supply to sell more products at a higher price.