DEFINITION of 'Shortage'

A situation where demand for a product or service exceeds the available supply. Possible causes of a shortage include miscalculation of demand by a company producing a good or service (i.e., the company can't produce enough to keep up with demand) or government policies (i.e., price fixing/rationing). Natural disasters that devastate the physical landscape of a region can also cause shortages of such essential products as food and housing, also leading to higher prices of those goods.


A government-imposed price ceiling can create a shortage. When the government does not allow the free market to dictate the price of an item based on its supply/demand, an artificially high number of people may decide to purchase that item because the price is artificially low. For example, if the government provides free doctor visits as part of a national health care plan, consumers may experience a shortage of doctor services because when people no longer have to pay directly for them, they will be likely to increase their demand for those services.

  1. Equilibrium

    The state in which market supply and demand balance each other ...
  2. Supply

    A fundamental economic concept that describes the total amount ...
  3. Price Fixing

    Establishing the price of a product or service, rather than allowing ...
  4. Demand

    An economic principle that describes a consumer's desire and ...
  5. Disequilibrium

    A situation where internal and/or external forces prevent market ...
  6. Elastic

    A situation in which the supply and demand for a good or service ...
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