Final answer:
At a price of $120, which is below the equilibrium price of $150 for wheat flour, a shortage would occur because the quantity demanded would exceed the quantity supplied. The exact size of the shortage would depend on the demand and supply curves, but it would result from the demand surpassing the supply at that price point.
Step-by-step explanation:
If the price was $120, it's important to consider the law of supply and demand to determine whether there would be a shortage or a surplus. A shortage occurs when the quantity demanded exceeds the quantity supplied, while a surplus happens when the quantity supplied exceeds the quantity demanded.
Based on the information provided, if the market equilibrium price for wheat flour was $150, at which quantity demanded equals quantity supplied, then at a price of $120 we would expect the quantity demanded to be higher than quantity supplied, resulting in a shortage. As price decreases from the equilibrium, the quantity demanded increases and the quantity supplied decreases, creating a gap where demand outstrips supply.
The exact quantities demanded and supplied at the $120 price point would depend on the specific demand and supply curves for the product. However, without those details, one can infer that, because $120 is below the equilibrium price, a shortage would indeed exist, and the magnitude of that shortage would be determined by the difference between the quantity demanded and the quantity supplied at that price level.