Effects of Shortage - Video Tutorials & Practice Problems
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Shortage
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now let's see a situation where the price is set too low. So when we have a price too low, we're gonna have what's called a shortage, meaning there's not enough in this situation right before we had too much. Now we have not enough. Now, the quantity demanded is gonna be greater than the quantity supplied. People want more than suppliers are willing to produce at the price. Okay, so let's go ahead just like before we had our equilibrium price of six here. Right, um Let's go ahead and set a low price. Um Let's go with four. The price of four here and well, first let's label our axes right? Price, quantity demand, double D. S going down, supply is the other one. So let's set our price too low here at four. So I'm gonna put P with an L. For low and that will be at four. And let's go ahead. And first, since supply comes first, let's go ahead and see what the quantity supplied would be at this price. So the price of four, it looks like suppliers are willing to put out six units. The quantity supplied is gonna be six units at a price of four. And how much are people gonna demand at this price? Hey, this is a really good price. $4. I want this many pizzas over here, right, 15 pizzas. The quantity demanded is way higher than the quantity supply. Right, we're seeing a big discrepancy here, we're not at equilibrium because the quantity supplied is not equal to the quantity demanded and we have what we're gonna call a shortage represented by this amount of quantity shortage right here, Right? So the shortage, in this case, if they were supplying six units and they're demanding 15 units, right? We have a shortage of nine units. Okay, alright, So we'll do one more thing here to talk about the law of supply and demand. Let's do that in the next video.