What do we call a market condition where demand exceeds supply, leading to higher prices?

The market condition where demand exceeds supply, leading to higher prices, is known as a shortage. In a shortage, consumers want to purchase more of a good or service than what is available at a given price point, creating upward pressure on prices as buyers compete for limited supply. This situation prompts sellers to potentially increase prices, as they can benefit from the high demand relative to the restricted supply.

Understanding this concept is crucial in fields like real estate and economics, where such conditions can significantly affect pricing strategies and market stability. Recognizing a shortage helps assess market dynamics, particularly during economic fluctuations or special circumstances, like natural disasters or sudden demand spikes.

In contrast, terms such as surplus refer to a situation where supply surpasses demand, leading to lower prices, while equilibrium reflects a balance where supply meets demand with no excess. Elasticity, on the other hand, measures how responsive the quantity demanded or supplied is to price changes, rather than describing market conditions directly. Therefore, the correct identification of a shortage in the context of demand outpacing supply highlights critical economic principles that inform markets.