What term is used to describe insufficient supply when demand exceeds the available quantity?

The correct term to describe a situation where demand exceeds the available supply is "shortage." A shortage occurs when consumers want to purchase more of a good or service than what is provided at a given price, leading to excess demand over supply. This imbalance often results in upward pressure on prices, as consumers compete for the limited quantity available, pushing the market toward a new equilibrium where supply meets demand.

In contrast, a surplus refers to a scenario where supply exceeds demand, meaning there are more goods available than consumers are willing to buy at a given price. Market failure relates to situations where the allocation of goods and services is not efficient, often due to barriers like monopolies or public goods. Equilibrium is the point at which the quantity demanded equals the quantity supplied, meaning there is no surplus or shortage present. Understanding these concepts helps clarify the dynamics of supply and demand in a market economy.