Final answer:
A market exhibits a shortage when the actual price is below the equilibrium price, leading to higher demand than supply. A price ceiling set below this price worsens the shortage by legally restricting how high the price can rise.
Step-by-step explanation:
For a market to exhibit a shortage, the actual price must be below the equilibrium price. This occurs because a price below equilibrium leads to greater quantity demanded than the quantity supplied, as consumers take advantage of the lower prices while suppliers are not willing to provide as much at that price. This situation is exacerbated when a price ceiling is set below the equilibrium price, which legally restricts how high the price can go. The result is an excess of demand over supply, which is the definition of a shortage in the context of market economics.
A price floor, on the other hand, is a legal minimum price and does not cause a shortage, but can cause a surplus if set above the equilibrium price. However, be aware that a price floor does not shift the demand or the supply curve; it simply imposes a minimum price that can legally be charged in the market.