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Shortage

In economics, a shortage or excess demand is a situation in which the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply (surplus).

Definitions[edit]

In a perfect market (one that matches a simple microeconomic model), an excess of demand will prompt sellers to increase prices until demand at that price matches the available supply, establishing market equilibrium.[1][2] In economic terminology, a shortage occurs when for some reason (such as government intervention, or decisions by sellers not to raise prices) the price does not rise to reach equilibrium. In this circumstance, buyers want to purchase more at the market price than the quantity of the good or service that is available, and some non-price mechanism (such as "first come, first served" or a lottery) determines which buyers are served. So in a perfect market the only thing that can cause a shortage is price.


In common use, the term "shortage" may refer to a situation where most people are unable to find a desired good at an affordable price, especially where supply problems have increased the price.[3] "Market clearing" happens when all buyers and sellers willing to transact at the prevailing price are able to find partners. There are almost always willing buyers at a lower-than-market-clearing price; the narrower technical definition doesn't consider failure to serve this demand as a "shortage", even if it would be described that way in a social or political context (which the simple model of supply and demand does not attempt to encompass).

a type of price control which involves a government-imposed limit on the price of a product or service.

Price ceilings

Anti- laws.

price gouging

Government on the sale of a product or service, such as prostitution or certain recreational drugs.

ban

Decisions by suppliers not to raise prices, for example to maintain friendly relationships with potential future customers during a supply disruption.

.

Artificial scarcity

Worker shortages in low-wage industries (, education, health care, rail transportation, aviation, retail, manufacturing, food, elderly care) caused by excessively low salaries (relative to the domestic cost of living) and adverse working conditions (excessive workload and working hours), which collectively lead to occupational burnout and attrition of existing workers, insufficient incentives to attract the inflow supply of workers (through a voluntary exchange), short-staffing at workplaces and further exacerbation (positive feedback) of staff shortages.[4]

hospitality and leisure

Shortages (in the technical sense) may be caused by the following causes:

(illegal) and Grey (unregulated) markets in which products that are unavailable in conventional markets are sold, or in which products with excess demand are sold at higher prices than in the conventional market.

Black

Artificial controls of demand, such as time (such as waiting in line at ) and rationing.

queues

Non-monetary bargaining methods, such as time (for example ), nepotism, or even violence.

queuing

Panic buying

.

Price discrimination

The inability to purchase a product, and subsequent .

forced saving

Increase in demand for .

substitute goods

due to artificial scarcity; a net loss of economic welfare to society occurs when an artificial limit of supply (by monopolies or oligopolies to maximise profits), limits the number of people who can enjoy the good.

Deadweight loss

Decisions which result in a below-market-clearing price help some people and hurt others. In this case, shortages may be accepted because they theoretically enable a certain portion of the population to purchase a product that they couldn't afford at the market-clearing price. The cost is to those who are willing to pay for a product and either can't, or experience greater difficulty in doing so.


In the case of government intervention in the market, there is always a trade-off with positive and negative effects. For example, a price ceiling may cause a shortage, but it will also enable a certain percentage of the population to purchase a product that they couldn't afford at market costs.[3] Economic shortages caused by higher transaction costs and opportunity costs (e.g., in the form of lost time) also mean that the distribution process is wasteful. Both of these factors contribute to a decrease in aggregate wealth.


Shortages may or will cause:[3]

Food shortages have occurred in the during the Great Depression.[5]

United States

and the United States occurred mainly during and after the world wars[6][7]

Rationing in the United Kingdom

Potato shortages in the Netherlands triggered the .[8][9]

1917 Potato riots

From 1920 to 1933 during , the creation of a black market for liquor was created due to the low supply of alcoholic beverages.[10]

prohibition in the United States

During the , during which long lines and rationing was used to control demand.[11]

1973 oil crisis

In the former during the 1980s, prices were artificially low by fiat (i.e., high prices were outlawed).[12][13] Soviet citizens waited in line for various price-controlled goods and services such as cars, apartments, or some types of clothing. From the point of view of those waiting in line, such goods were in perpetual "short supply"; some of them were willing and able to pay more than the official price ceiling, but were legally prohibited from doing so. This method for determining the allocation of goods in short supply is known as "rationing".

Soviet Union

From the mid-2000s through the 2010s, occurred, due to the Venezuelan government's economic policies;[14] such as relying on foreign imports while creating strict foreign exchange controls, put price controls in place and having expropriations result with lower domestic production. As a result of such shortages, Venezuelans had to search for products, wait in lines for hours and rationing was initiated, with the government allowing the purchase of a certain amount of products when it's available, through fingerprint recognition.[15][16][17]

shortages in Venezuela

Shortages in sparked a revolution in 2019 which ended President Omar al-Bashir's 30-year rule. They continued into 2020.[18]

Sudan

Panic buying due to the caused food and product shortages around the world.[19]

COVID-19 pandemic

Many regions around the world have experienced shortages in the past.

Shortages and "longages"[edit]

Garrett Hardin emphasised that a shortage of supply can just as well be viewed as a "longage" of demand. For instance, a shortage of food can just as well be called a longage of people (overpopulation). By looking at it from this view, he felt the problem could be better dealt with.[20]

Kornai, János, Socialist economy, Princeton University Press, 1992,  0-691-00393-9

ISBN

Kornai, János, Economics of Shortage, Amsterdam: North Holland Press, Volume A, p. 27; Volume B, p. 196 .

: Kornai's Soft Budget Constraint and the Shortage Phenomenon: A Criticism and Restatement, in: Economics of Planning, Vol. 19. 1985. No. 1.

Gomulka, Stanislaw

Planning Shortage and Transformation. Essays in Honor of Janos Kornai, Cambridge, Massachusetts: MIT Press, 2000

Myant, Martin; Drahokoupil, Jan (2010), Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia, Wiley-Blackwell,  978-0-470-59619-7

ISBN

János Kornai

Home Page at Harvard University

János Kornai

Home Page at Collegium Budapest

and Part 2 of COMPARING AND ASSESSING ECONOMIC SYSTEMS, Shortage and Inflation: The Phenomenon, PPT (PowerPoint file presentation) at West Virginia University

Part 1

János Kornai 'The Soft Budget Constraint'

David Lipton and Jeffrey Sachs 'The Consequences of Central Planning in Eastern Europe'

On overview and critique of Kornai's account can be found in Myant, Martin; Jan Drahokoupil (2010). . Hoboken, New Jersey: Wiley-Blackwell. pp. 19–23. ISBN 978-0-470-59619-7.

Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia

Planning For The Looming Labor Shortage - A Supply Chain Perspective by HK Systems

- A Duke University Study

"America's New Immigrant Entrepreneurs"

Criticism of high-tech shortage claims

Disputation of High-tech Labor Shortage by Dr. Matloff

RAND Study on Alleged Shortage of Scientists

Shortage of skilled workers knocks red tape off top of business constraints league table - Grant Thornton IBR

The Real Science Gap - "It's not insufficient schooling or a shortage of scientists. It's a lack of job opportunities."