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. 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. "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).
Shortages (in the technical sense) may be caused for the following:
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. 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 cause:
Black (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.
Artificial controls of demand, such as time (such as waiting in line) and rationing.
Non-monetary bargaining methods, such as time (for example queuing), nepotism, or even violence.
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 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".
From the mid-2000s through the 2010s, shortages in Venezuela occurred, due to the Venezuelan government's economic policies; 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.
Shortages in Sudan sparked a revolution in 2019 which ended President Omar al-Bashir's 30-year rule. They continued into 2020.
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.
Wage levels have been suggested as one way to measure a labour shortage. However, that often does not match people's common perceptions. For example, if wages alone are the best measure of labour shortages, then that would imply that doctors, instead of farm workers, should be imported because doctors are far more expensive than farm workers. However, there are institutionally-imposed limits on the number of doctors that are allowed to be licensed. If foreign migrant workers were not allowed into a nation, farm wages may go up but probably not enough to approach the wages of doctors.
The Atlantic slave trade (which originated in the early 17th century but ended by the early 19th century) was said to have originated from perceived shortages of agricultural labour in the Americas (particularly in the Southern United States). It was thought that bringing African labor was the only means of malaria resistance available at the time. Ironically, malaria seems to itself have been introduced to the "New World" via the slave trade.
^"Depression and the Struggle for Survival". Library of Congress. Retrieved 30 March 2020. The Great Depression of the 1930s hit Mexican immigrants especially hard. Along with the job crisis and food shortages that affected all U.S. workers, Mexicans and Mexican Americans had to face an additional threat: deportation.Check date values in: |access-date= (help)