A shortage occurs when the quantity
demanded is higher than the available supply. When the demand for a good rises
but there are a few in supply there are two things that could happen. Buyers
would bid the price up in order to secure a share of that scarce resource or
producers would try to slow the demand by raising the price and bring the equilibrium
to higher levels so only the most desperate buyers are left before they can
match their production with the trend in demand.
According to the law of demand, when the price rises the quantity demanded would
fall that is as long as consumer's income or available resources didn't increase
with the rise in price of common goods. An increase in income or the degree
of importance of the good in everyday living would keep demand steady with a
rising price. This scenario is usually accompanied with an expanding economy
since there is no drop in demand on rising prices. There is a threshold for
this expansion of course, as producers continually make more to match demand
everybody would in one point over do it causing supply to go past higher with
the new equilibrium and would eventually trigger a drop in prices due to a surplus.