HISET Social Studies Practice

Which of the following indicates a situation of economic shortage?

1. High levels of unsold inventory

2. Increased prices due to demand

3. A growing demand exceeding supply

4. Lower production costs

The correct answer is: A growing demand exceeding supply

The situation of economic shortage is accurately indicated by the growing demand exceeding supply. When demand for a product or service surpasses the supply available in the market, it creates a shortage. This often leads to higher prices as consumers compete for the limited goods. Various factors can drive this scenario, such as a sudden increase in consumer interest or a decrease in production capacity, and it reflects the fundamental economic principle that when more people want something than is available, a shortage occurs. The other options represent different economic conditions. High levels of unsold inventory typically suggest a surplus rather than a shortage. Increased prices due to demand can be a consequence of a shortage, but by itself, it does not directly indicate that a shortage exists. Lower production costs generally imply that more goods can be produced, thus pointing to a potential increase in supply rather than a situation of shortage.