Shortage
SHORTAGE
A shortage exists when there is a greater demand for a product or service than there is a supply of the product or service. A shortage usually occurs when the price of a product or service in the marketplace is below its equilibrium price. The equilibrium price is the price at which there is neither an insufficient supply nor an over abundance of the product or service. When the price of a product or service is less than equilibrium, consumers will demand more of the product or service than the suppliers are willing to sell, which in turn creates a shortage. Consumers will then bid up the price of the product or service until it reaches its equilibrium. The equilibrium price is the one that brings the market into balance by equating supply and demand. If the government interferes with or takes control of a shortage situation, a black market may develop. A shortage may also be referred to as an excess demand.
See also: Price, Surplus