Question

Effect of rationing and hoarding

Answer 1

Answer:

Rationing distorts consumer behavior since consumers cannot purchase their desired quantities at government controlled prices. Since consumers incur smaller than desired expenditures for rationed goods and services, rationing may lead to increased demand for other commodities that can be purchased freely.

Secondary economic effects result from hoarding. Hoarding is an increase in demand. In the short-run with supply fixed, the price of the hoarded good would increase. With every increase-in demand, the price of the hoarded good would continue rising producing inflation.

Answer 2

Effect of hoarding in economics:

• Secondary economic effects are the products of hoarding.  

• Hoarding is an upsurge in demand. In the short-run with source fixed, the price of the hoarded good would rise. This price growth does not necessarily mean that a real shortage problem exists in the long-run.

Effect of rationing in economics:

• The effect of rationing function of a price rise is to depress demand, conserve resources, and extent out their use over time.  

• The more the scarcity, the higher the price and the more the reserve is rationed.

Hope it helped....!