The shortage is a market imbalance generated by the temporary absence of a good or service.
This is generated when the quantities offered are insufficient compared to the quantities demanded. It usually disappears naturally over time while the market is self-regulating. In the economies that do not have a free trade system between supply and demand, problems of shortage are more frequent.
Causes of shortage
The shortage can occur in any market (food, health, textile, among others). The factors that can cause it are:
- Price controls:The government sets a lower price than the market, altering the price system of the economy.
- Increase in demand:An unexpected increase in demand for a product. For example, generated by an increase in income.
- Supplydecrease : An unexpected reduction in the quantity offered by the producers. For example, for damage to food crops.
Effects of shortage
The shortage has temporary effects, when these become systematic they lead to shortages. Some of the negative effects it induces are the following:
- Black markets: Markets that access products with higher costs.
- Rationing: Imposition of limitations for the acquisition of a good or service.
- Forced savings: Inability to obtain a good or service.
Consider a community where 10 people live and there is only one milk supplier. The milk producer during the month of January could only manufacture 5 liters of milk, due to a temporary issue. However, the demand of the community is 10 liters, one liter per inhabitant per month. Therefore, an imbalance is created in the market causing a shortage of 5 liters of milk in the community. This change in the market will cause an increase in the price of milk for consumers who will be willing to pay a higher price in order to get the milk.
If the problem persists, market imbalances worsen. However, the producer could recover or the inhabitants get an external supplier.