Shortage

All too frequently 'shortage' is used in an assertive way by people having a vested interest of some sort in the entity asserted to be in short supply. The way economists would address any question of the adequacy of the supply of an entity relates to the value to be attached to the increase (and by whom it is attached) compared to the cost of creating the increase. If the value exceeds the cost, there is a shortage in the sense that (ceteris paribus, and given a few other assumptions) more ought to be consumed. More crudely, if demand exceeds supply at the going price there is said to be a shortage. However it does not follow that this shortage ought to be eliminated (for example, by allowing price to rise, supply to increase or demand to fall, or any combination of these three) unless there are grounds for believing that the efficient (or equitable) allocation of resources would be enhanced thereby. Likewise, in comparing the marginal value with the marginal cost, the interpretation given above applies only if illegitimate omissions from marginal cost and marginal value do not cause the ratio to fall below 1.0. Cf. Excess Demand.

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