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What is market shortage?

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Quick Answer

Market shortage is a situation where the demand of a product is higher than the supply. In most cases, a shortage in the market leads to an increase in commodity or service prices. In ideal situations, the market should be at an equilibrium or a state in which the demand and supply is almost balanced, notes EconPort.

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Full Answer

One cause of market shortage is a lack of raw materials. If a particular firm gets its raw materials from a region that has been hit by a natural disaster, the company may not be able to get enough supply of the materials. This is because the production of the raw materials may have been affected by the disaster.

Another cause of market shortage regards government regulations. If the government sets a given price on a commodity or service, more people may be able to afford it. This will make it difficult for suppliers to answer to everyone's needs.

Market shortage may also occur when the government imposes a ban on imports of given products. This is because local suppliers may not be able to produce as much of the product as the market demands. When the supply of a product or service is higher than demand, the situation results into a market surplus, notes ClimateProgress.

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