Question

Immediately after an ice storm brought down power lines throughout the region, hardware stores were sold out of batteries and flashlights. However, within a couple of days, special deliveries brought in extra batteries and flashlights, and everyone who wanted to buy a flashlight or batteries was able to do so. Which of the following principles of economic interaction best describes this scenario?
A) When markets do not achieve efficiency, government intervention can improve overall welfare.
B) All costs are opportunity costs.
C) There are gains from trade.
D) Markets allocate goods effectively.

Answer 1

Answer:

D) Markets allocate goods effectively.

Explanation:

This is a situation where the market responded immediately to demand shock,  demand shock in economics is a sudden event that lead to either upsurge in demand or decrease in demand which in most cases a temporary occurrence. This is a case where the price system or market forces or simply put, the forces of demand and supply carried out one of their functions in a market economy.