Question 10

A market shortage occurs when the quantity supplied is less than the equilibrium quantity.

In a market shortage, the quantity of a good or service that consumers want to purchase exceeds the amount that producers are willing to sell at the current price, leading to a situation where the quantity supplied is less than the equilibrium quantity.

A) The quantity demanded is less than the equilibrium quantity.

This option is incorrect because a market shortage specifically occurs when the quantity demanded exceeds the quantity supplied, not when it is less. If the quantity demanded were less than the equilibrium quantity, it would indicate a market surplus rather than a shortage.

B) The quantity supplied is less than the equilibrium quantity.

This statement accurately describes a market shortage. In this scenario, demand outstrips supply at the prevailing price, resulting in a shortage where consumers cannot purchase as much of the good as they desire, leading to potential price increases.

C) There is downward pressure on the price.

This option is incorrect in the context of a market shortage. A shortage typically creates upward pressure on prices as consumers compete for the limited goods available, rather than downward pressure.

D) Price is greater than equilibrium price.

This statement is incorrect regarding a market shortage. In a shortage, prices tend to be below the equilibrium price, leading to increased demand and insufficient supply, not above it.

Conclusion

The correct answer is option B, as it directly correlates to the definition of a market shortage. Other options either misinterpret the dynamics of supply and demand or describe scenarios that do not align with the characteristics of a shortage. Understanding this concept is crucial for analyzing market behavior and price fluctuations.