Shortage Adjustment in Free Market Steps:

• Shortage occurs when quantity demanded exceeds quantity supplied at the current price, below equilibrium.
• Price rises to restore balance as buyers compete.
• Rising price reduces quantity demanded per the law of demand.
• Rising price increases quantity supplied per the law of supply.

Why B is correct:

• In shortage, price increases to equilibrium, decreasing quantity demanded (downward-sloping demand curve) and increasing quantity supplied (upward-sloping supply curve).

Why the others are wrong:

• A: Price decrease would increase shortage by boosting demand and curbing supply.
• C: Quantity supplied decreases incorrectly; supply law dictates it rises with price.
• D: Quantity demanded increases incorrectly; demand law dictates it falls with price.

Final answer: B