When does a shortage occur in the market?

A shortage occurs in the market when the quantity demanded exceeds the quantity supplied. This situation typically arises when the market price is set below the equilibrium price, leading buyers to want more of the good or service than what is available. As a result, consumers find it difficult to purchase the quantity they desire, which ultimately creates a feeling of scarcity in the market.

In contrast, when quantity supplied exceeds quantity demanded, it indicates a surplus rather than a shortage. At equilibrium, supply and demand are balanced, meaning there is neither excess demand nor excess supply. Additionally, a decrease in demand typically leads to either a lower equilibrium price or a surplus, but not a shortage, as the quantity supplied would then likely exceed the reduced quantity demanded. Understanding the dynamics of supply and demand is essential for recognizing how various conditions affect market equilibrium and the occurrence of shortages.