Now let's see a situation where the price is set too low. So when we have a price too low, we're going to have what's called a shortage, meaning there's not enough in this situation, right? Before we had too much, now we have not enough. Now the quantity demanded is going to be greater than the quantity supplied. People want more than suppliers are willing to produce at the price. Okay. So let's go ahead. Just like before, we had our equilibrium price of 6 here right? Let's go ahead and set a low price. Let's go with 4. The price of 4 here and well, first let's label our axes, right? Price, quantity, demand, double d is going down, supply is the other one. So let's set our price too low here at 4. So I'm going to put p with an l for low and that'll be at 4, and let's go ahead and supply comes first, let's go ahead and see what the quantity supplied would be at this price. So the price of 4, it looks like suppliers are willing to put out 6 units. The quantity supplied is going to be 6 units at a price of 4, and how much are people going to demand at this price? Hey, this is a really good price. $4 I want this many pizzas over here right. 15 pizzas, the quantity demanded is way higher than the quantity supplied, right. We're seeing a big discrepancy here. We're not at equilibrium because the quantity supplied is not equal to the quantity demanded and we have what we're going to call a shortage, represented by this amount of quantity shortage right here. Right. So the shortage in this case, if they're supplying 6 units and they're demanding 15 units right, we have a shortage of 9 units. Okay? Alright. So we'll do one more thing here to talk about the law of supply and demand. Let's do that in the next video.
3. The Market Forces of Supply and Demand
Effects of Shortage