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Information about Economic Shortage

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Polish meat shop in the 1980s.


Economic shortage is a term describing a disparity between the amount demanded for a product or service and the amount supplied in a market. Specifically, a shortage occurs when there is excess demand; therefore, it is the opposite of a surplus.

Economic shortages are related to price—when the price of an item is "too low," there will be a shortage. In most cases, a shortage will compel firms to increase the price of a product until it reaches market equilibrium. Sometimes, however, external forces cause more permanent shortages—in other words, there is something preventing prices from rising or otherwise keeping supply and demand unbalanced.

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. In the economic use of "shortage", however, the affordability of a good for the majority of people is not an issue: If people wish to have a certain good but cannot afford to pay the market price, their wish is not counted as part of demand.

Effects

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 portion of the population to purchase a product that they couldn't afford at market costs. Economic shortages are generally seen as undesirable since they lead to economic inefficiency. In absence of a price mechanism, resources are less likely to be distributed according to people's utility. 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.

More generally, regardless of their cause, shortages may result in:
  • Black markets - illegal 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.
  • Artificial controls on demand, such as rationing.
  • Non-monetary bargaining methods, such as time (for example waiting in line), nepotism, or even violence.
  • Price discrimination
  • The inability to purchase a product.

Examples

  • In the former Soviet Union during the 1980s, prices were artificially low by fiat (i.e., high prices were outlawed). Soviet citizens waited in line (or "queued") 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".
  • In the United States one of the most extreme examples of economic shortages are those caused by price ceilings on recreational drugs such as cocaine, heroin, and marijuana. Government enforced prohibition effectively establishes a price ceiling of negative infinity; it is illegal to buy or sell these goods at any price. At the legally enforced price of negative infinity, consumers face a shortage of legal cocaine. They opt for legal cocaine's best substitute, illegal cocaine, and resort to illegal transactions at prices higher than the ceiling. The shortage in this case prevails only within the legal market; the black market in fact clears at black market prices.
Other examples of economic shortages include: Whether an economic shortage of a certain good or service is beneficial or detrimental to society often depends on one's ethical and political views. For instance, consider the shortage of recreational drugs discussed above, and the controversies around the use of such drugs. Likewise, consider the economic shortage of cars in the Soviet Union during the 1980s: On the one hand, people had to wait in line to buy a new car; on the other hand, cars were more affordable than they would have been at market prices.

See also

References

  • Alchian, Armen A.; Allen, William R.. Exchange and Production: Competition, Coordination, and Control. ISBN 0-534-01320-1. 
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Topics in microeconomics
Scarcity • Opportunity cost • Supply and demand • Elasticity • Economic surplus • Economic shortage • Aggregate demand • Consumer theory • Production, costs, and pricing • Market form • Welfare economics • Market failure
Aspinwall Classification System (Leo Aspinwall, 1958) classifies and rates products based on five variables:
  1. Replacement rate (How frequently is the product repurchased?)
  2. Gross margin (How much profit is obtained from each product?)

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Service can refer to:
  • Public services, services carried out with the aim of providing a public good
  • A penetrant, as defined by a building code
  • Service (Systems Architecture), the provision of a discrete business or technology function within a systems environment; i.

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market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. It is one of the two key institutions that organize trade, along with the right to own property.
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  • budget surplus, the opposite of a budget deficit
  • in economics, economic surplus (including producer surplus and consumer surplus), and capital surplus
  • an excess of production or supply over demand (see supply and demand)

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price is the assigned numerical monetary value of a good, service or asset.

The concept of price is central to microeconomics where it is one of the most important variables in resource allocation theory (also called price theory).
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Business law
Business organizations
Basic forms:
Sole proprietorship
Corporation
Partnership
(General · Limited · LLP)
Cooperative
USA:
Business trust · LLC · LLLP
Delaware corporation
Nevada corporation
UK/Commonwealth:
Limited company
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economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
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In economics, utility is a measure of the relative satisfaction or desiredness from consumption of goods. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility.
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In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. For example, most people, when buying or selling a stock, must pay a commission to their broker; that commission is a transaction cost of doing the stock deal.
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In economics, opportunity cost, or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits which could be received from that opportunity), or the most valuable forgone alternative (or highest-valued option forgone), i.e.
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Economic systems

Ideologies and Theories
Primitive communism
Capitalist economy
Corporate economy
Fascist economy
Laissez-faire
Mercantilism
Natural economy
Social market economy
Socialist economy
Communist economy


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Rationing is the controlled distribution of resources and scarce goods or services: it restricts how much people are allowed to buy or consume. Rationing controls the size of the ration
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Queue areas are places in which people in line (first-come, first-served) wait for goods or services. Examples include checking out groceries or other goods that have been collected in a self service shop, in a shop without self service, at an ATM, at a ticket desk, a city bus, or
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Discrimination

Major forms
Racism
Sexism
Homophobia
Ageism
Antisemitism
Islamophobia
Ableism

Manifestations
Slavery · Racial profiling
Hate speech · Hate crime
Genocide · Ethnocide · Holocaust
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Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. In a theoretical market with perfect information, no transaction costs or prohibition on secondary exchange (or re-selling) to prevent arbitrage, price
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Union of Soviet Socialist Republics (abbreviated USSR, Russian: (help info ) ; tr.
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worldwide view of the subject.
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Rationing is the controlled distribution of resources and scarce goods or services: it restricts how much people are allowed to buy or consume. Rationing controls the size of the ration
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Motto
"In God We Trust"   (since 1956)
"E Pluribus Unum"   ("From Many, One"; Latin, traditional)
Anthem
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Recreational drug use is the use of psychoactive drugs for recreational purposes rather than for work, medical or spiritual purposes, although the distinction is not always clear.
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Heroin (INN: diacetylmorphine, BAN: diamorphine) is a semi-synthetic opioid synthesized from morphine, a derivative of the opium poppy, Papaver somniferum.
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Cannabis, also known as marijuana[1] or ganja,[2] is a psychoactive product of the plant Cannabis sativa L. subsp. indica (= C. indica Lam.).
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The 1973 oil crisis began in earnest on October 17, 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced, as a result of the ongoing Yom Kippur War, that they would no longer ship
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Prohibition of alcohol, often shortened to the term prohibition, also known as Dry Law, refers to a sumptuary law in a given jurisdiction which prohibits alcohol.
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distilled beverage is a consumable liquid containing ethyl alcohol (ethanol) purified by distillation from a fermented substance such as fruit, vegetables, or grain. The word spirits
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Ethics (via Latin ethica from the Ancient Greek ἠθική [φιλοσοφία]
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Politics is the process by which groups of people make decisions. Although the term is generally applied to behavior within civil governments, politics is observed in all human group interactions, including corporate, academic, and religious
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Shortage economy (Polish: gospodarka niedoboru, Hungarian: hiánygazdaság) is a term coined by the Hungarian economist, János Kornai. This is a term he used to criticize the old centrally-planned economies of the communist states of Eastern Europe.
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In economics, scarcity is defined as the condition of human wants and needs exceeding production possibilities. In other words, society does not have sufficient productive resources to fulfill those wants and needs.
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wood gas generator is a wood-fueled gasification reactor mounted on an internal combustion engine, to provide a wood gas, a form of syngas.

Shortages of petroleum-based fuels during World War II resulted in very large numbers of such generators, often improvised.
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