Quantity Demanded Exceeds Quantity Supplied Flashcards, test questions and answers

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What is Quantity Demanded Exceeds Quantity Supplied?

The concept of quantity demanded exceeds quantity supplied is an economic principle that states that when the quantity of a good or service that buyers demand is greater than the amount supplied by sellers, a shortage will occur. This can lead to increased prices and competition among buyers for the limited resources.When quantity demanded exceeds quantity supplied, it means that the demand for a certain product or service has outstripped its supply. There are various causes for this phenomenon. One common cause is when the production costs associated with producing more of a product become too high, preventing companies from expanding their output to meet rising market demand. Another cause could be due to limitations in raw materials or other resources necessary to manufacture a product on a large scale. The most immediate consequence of this situation is an increase in price as sellers take advantage of higher demand and limited supply to charge higher prices for their goods and services. This also results in an increase in competition between buyers as they attempt to secure their desired products despite limited availability, often resulting in bidding wars or long lines at stores trying to stock up on scarce items. In cases where shortages occur due to natural disasters or geopolitical events, governments may step in with rationing policies so that all citizens have access to essential goods and services without having them become unavailable due to exploitation by opportunistic resellers seeking high profits through inflated prices. Governments may also intervene through pricing controls so that merchants cannot take advantage of high demand levels while keeping prices artificially low when there are no shortages present.