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Shortage

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Unemployed men queue outside a depression soup kitchen in United States during the Great Depression.
A 2014 image of product shortages in Venezuela

In economics, a shortage or excess demand is a situation in which the demand for a product or service exceeds its supply in a market. It is the opposite of an excess supply (surplus).

Definitions

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In a perfect market (one that matches a simple microeconomic model), an excess of demand will prompt sellers to increase prices until demand at that price matches the available supply, establishing market equilibrium.[1][2] In economic terminology, a shortage occurs when for some reason (such as government intervention, or decisions by sellers not to raise prices) the price does not rise to reach equilibrium. In this circumstance, buyers want to purchase more at the market price than the quantity of the good or service that is available, and some non-price mechanism (such as "first come, first served" or a lottery) determines which buyers are served. So in a perfect market the only thing that can cause a shortage is price.

In common use, the term "shortage" may refer to a situation where most people are unable to find a desired good at an affordable price, especially where supply problems have increased the price.[3] "Market clearing" happens when all buyers and sellers willing to transact at the prevailing price are able to find partners. There are almost always willing buyers at a lower-than-market-clearing price; the narrower technical definition doesn't consider failure to serve this demand as a "shortage", even if it would be described that way in a social or political context (which the simple model of supply and demand does not attempt to encompass).

Causes

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Shortages (in the technical sense) may be caused by the following causes:

Effects

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Decisions which result in a below-market-clearing price help some people and hurt others. In this case, shortages may be accepted because they theoretically enable a certain portion of the population to purchase a product that they couldn't afford at the market-clearing price. The cost is to those who are willing to pay for a product and either can't, or experience greater difficulty in doing so.

In the case of government intervention in the market, there is always a trade-off with positive and negative effects. For example, a price ceiling may cause a shortage, but it will also enable a certain percentage of the population to purchase a product that they couldn't afford at market costs.[3] Economic shortages caused by higher transaction costs and opportunity costs (e.g., in the form of lost time) also mean that the distribution process is wasteful. Both of these factors contribute to a decrease in aggregate wealth.

Shortages may or will cause:[3]

Examples

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Empty supermarket shelves in the dry pasta section due to panic-buying as the result of the 2020 COVID-19 outbreak

Many regions around the world have experienced shortages in the past.

Shortages and "longages"

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Garrett Hardin emphasised that a shortage of supply can just as well be viewed as a "longage" of demand. For instance, a shortage of food can just as well be called a longage of people (overpopulation). By looking at it from this view, he felt the problem could be better dealt with.[19]

Labour shortage

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Further information: Labour economics

In its narrowest definition, a labour shortage is an economic condition in which employers believe there are insufficient qualified candidates (employees) to fill the marketplace demands for employment at a wage that is mostly employer-determined. Such a condition is sometimes referred to by economists as "an insufficiency in the labour force." An ageing population and a contracting workforce and a birth dearth may curb U.S. economic expansion for several decades, for example.[20]

In a wider definition, a widespread domestic labour shortage is caused by excessively low salaries (relative to the domestic cost of living) and adverse working conditions (excessive workload and working hours) in low-wage industries (hospitality and leisure, education, health care, rail transportation, aviation, retail, manufacturing, food, elderly care), which collectively lead to occupational burnout and attrition of existing workers, insufficient incentives to attract the inflow supply of domestic workers, short-staffing at workplaces and further exacerbation (positive feedback) of staff shortages.[21]

Labour shortages occur broadly across multiple industries within a rapidly expanding economy, whilst labour shortages often occur within specific industries (which generally offer low salaries) even during economic periods of high unemployment.[22] In response to domestic labour shortages, business associations such as chambers of commerce would generally lobby to governments for an increase of the inward immigration of foreign workers from countries which are less developed and have lower salaries.[23] In addition, business associations have campaigned for greater state provision of child care, which would enable more women to re-enter the labour workforce.[24] However, as labour shortages in the relevant low-wage industries are often widespread globally throughout many countries in the world, immigration would only partially address the chronic labour shortages in the relevant low-wage industries in developed countries (whilst simultaneously discouraging local labour from entering the relevant industries) and in turn cause greater labour shortages in developing countries.[25]

Wage factors

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The Atlantic slave trade (which originated in the early 17th century but ended by the early 19th century) was said to have originated from perceived shortages of agricultural labour in the Americas (particularly in the Southern United States). It was thought that bringing African labor was the only means of malaria resistance available at the time.[26]

See also

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References

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  1. ^ Tucker (2014) Economics Today
  2. ^ "3.3 Demand, Supply, and Equilibrium". Principles of Economics. University of Minnesota. 2016-06-17.
  3. ^ a b c Pettinger, Tejvan (3 April 2020). "Shortages". Economics Help. Retrieved 2022-10-06.
  4. ^ "Depression and the Struggle for Survival". Library of Congress. Retrieved 30 March 2020. The Great Depression of the 1930s hit Mexican immigrants especially hard. Along with the job crisis and food shortages that affected all U.S. workers, Mexicans and Mexican Americans had to face an additional threat: deportation.
  5. ^ "What You Need To Know About Rationing In The Second World War". Imperial War Museums. Retrieved 2022-10-06.
  6. ^ "Sacrificing for the Common Good: Rationing in WWII (U.S. National Park Service)". www.nps.gov. Retrieved 2022-10-06.
  7. ^ "Potato eaters shot". International Institute of Social History. 7 July 1917.
  8. ^ "Potato riots in Amsterdam". Bendigo Advertiser. 6 July 1917. p. 7 – via National Library of Australia.
  9. ^ Macias, Amanda (17 January 2020). "Prohibition began 100 years ago – here's a look at its economic impact". CNBC. Retrieved 2022-10-06.
  10. ^ "The Oil Shocks of the 1970s | Energy History". energyhistory.yale.edu. Retrieved 2022-10-06.
  11. ^ "Why Price Controls Should Stay in the History Books". www.stlouisfed.org. Retrieved 2022-10-06.
  12. ^ Shapiro, Margaret (1992-01-02). "RUSSIA ENDS PRICE CONTROLS TODAY". Washington Post. ISSN 0190-8286. Retrieved 2022-10-06.
  13. ^ "Venezuela seizes warehouses packed with medical goods, food". Reuters. 2014-10-24. Retrieved 2015-12-07.
  14. ^ "Why are Venezuelans posting pictures of empty shelves?". BBC. 8 January 2015. Retrieved 10 January 2015.
  15. ^ Cawthorne, Andrew (21 January 2015). "In shortages-hit Venezuela, lining up becomes a profession". Reuters. Retrieved 17 June 2015.
  16. ^ Schaefer Muñoz, Sara (22 October 2014). "Despite Riches, Venezuela Starts Food Rationing; Government Rolls Out Fingerprint Scanners to Limit Purchases of Basic Goods; 'How Is it Possible We've Gotten to This Extreme'". Dow Jones & Company Inc. The Wall Street Journal. Retrieved 11 November 2014.
  17. ^ "Sudan: Frustration grows over fuel, bread shortages". Al Jazeera. 11 March 2020.
  18. ^ Tkyo, Kelly (29 February 2020). "Coronavirus fears empty store shelves of toilet paper, bottled water, masks as shoppers stock up". USA Today.
  19. ^ Video Interview with Garrett Hardin: Longages and Overpopulation Predictions Educational Communications program 803, 1990
  20. ^ Shrinking labour force may curb U.S. expansion for two decades
  21. ^ Bhattarai, Abha (2022-09-16). "Worker shortages are fueling America's biggest labor crises". The Washington Post. Retrieved 2022-10-06.
  22. ^ West, Darrell M. (April 10, 2013). "The Paradox of Worker Shortages at a Time of High National Unemployment". Brookings Institution. Retrieved 2022-10-06.
  23. ^ "U.S. Chamber's Bradley: The Current Labor Shortage is 'Unprecedented,' Urges Solutions on Immigration, Childcare". United States Chamber of Commerce. 6 May 2022. Retrieved 2022-10-06.
  24. ^ "Data Deep Dive: A Decline of Women in the Workforce". United States Chamber of Commerce. 27 April 2022. Retrieved 2022-10-06.
  25. ^ Daniel, Dana (2022-07-29). "Train your own nurses, Australia told amid global shortage". The Sydney Morning Herald. Retrieved 2022-10-06.
  26. ^ "As American as…Plasmodium vivax?"
  • Kornai, János, Socialist economy, Princeton University Press, 1992, ISBN 0-691-00393-9
  • Kornai, János, Economics of Shortage, Amsterdam: North Holland Press, Volume A, p. 27; Volume B, p. 196 .
  • Gomulka, Stanislaw: Kornai's Soft Budget Constraint and the Shortage Phenomenon: A Criticism and Restatement, in: Economics of Planning, Vol. 19. 1985. No. 1.
  • Planning Shortage and Transformation. Essays in Honor of Janos Kornai, Cambridge, Massachusetts: MIT Press, 2000
  • Myant, Martin; Drahokoupil, Jan (2010), Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia, Wiley-Blackwell, ISBN 978-0-470-59619-7
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