There are certain classes of goods and services for which demand always exceeds supply, for example, tickets to the Super Bowl, World Cup Final or dinner reservations for 8pm Saturday evening at the most popular restaurant in any major city. Standard microeconomic theory predicts that prices will go up when demand exceeds supply. However, the prices for some goods or services are often too low. For example, restaurants sell dinners at the same price even though they predict the demand for certain times is higher.

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Question Indeed according to microeconomic theory prices rise whenever there is a greater demand for an item than there is supply Although some seller... View the full answer