Question

What economic decision always causes a shortage – any time, any place?

Answer 1

Situation of shortage occurs when there is Excess Demand in the market. The economic decision that always lead to shortage is setting the price below the threshold value.

The Government in order to procure consumer interests sets the price below the equilibrium point. There are always unfair trade practices being adopted by the producers in which they charge higher prices and try to churn higher profits. In order to discourage such practices, government sets the lower price.

Lower price induces excess demand and create Shortage.