Shortages

Shortages are excess demand and not enough supply which causes a disequilibrium. Shortages are often short term however they could be long term. Also, shortages are often confused with scarcity. The main difference between the two is that shortages occur because of the willingness of a producer to offer a good or service, and scarcity occurs when there are limited quantities if resources to meet unlimited needs or desires.

Here are two examples of shortages and why they are used.

1) An artist comes out with a new album and the producer only manufactures x amount of cd's to ensure that the value stays high and all the cd's sell out. If demand stays high the producer may manufacture more. The whole goal of having a shortage is for the producer to make the most amount of total revenue.

2) A new game station commercial has just gone viral and it's hyped up to be the best one yet. Producers know that there  will be a high demand for it ,and people will be willing to pay a higher price to ensure they get the system first. In order for the producers to hike up the price the game station must seem "rare." Therefore, producers manufacture less than the demanded amount at a given time. After the first wave of stations are sold for the highest amount they may produce more stations, but this time the price may have to be lower.

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