Prices go up when there's a shortage because people are willing to pay more for something they can't get everywhere. Imagine you're at a lemonade stand, and everyone wants the same cup of lemonade, but there aren’t enough cups to go around. The person who is most eager to buy it might be willing to pay extra just to get it first.
Examples
- There’s only one pizza at the party, and everyone wants to eat it. The first person gets it for free, but others have to pay extra.
- Your favorite snack runs out at the store, so you buy it even though it costs more.
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See also
- Why Do We Have Different Kinds of Taxes?
- Why Do Prices Change So Much?
- Why Do We Use Money Instead of Bartering?
- Why Do Prices Go Up So Much When There's a Shortage?
- Why Do We Have Different Kinds of Coins?
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Categories: Economics · supply and demand,economics basics,market dynamics