Shortage
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Definition of a Shortage:
A
shortage occurs when the quantity demanded exceeds the quantity supplied. Shortages occur at prices less than the equilibrium price.
Detailed Explanation:
A shortage
results when the quantity supplied is less than the quantity demanded at a given price. Consumers will bid prices higher to provide suppliers a greater incentive to produce more. Shortages exist at all prices below the equilibrium price. For example, at a price of $6 per hour, parents may demand 38,000 babysitting hours, but sitters would only be enticed to provide 28,000 hours. In such a case, there would be a shortage of 10,000 hours. Some parents would struggle to find a babysitter and bid the price up to find someone to sit for their child.
