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A situation when the demand for a good or service exceeds the available supply. This can only occur if price is not adjusted to clear the market. If there is a sudden rise in the demand or fall in the supply of a good, law or social convention may prevent the price from rising far enough to clear the market, thus creating a shortage. When this occurs, available supplies of the good must be allocated by some non-price method, such as formal or informal ‘rationing, or queuing.
Reference: Oxford Press Dictonary of Economics, 5th edt.
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