Final answer:
A shortage or surplus is defined by whether the quantity demanded is greater or lesser than the quantity supplied, respectively. The equilibrium quantity is where these two are equal, with no surplus or shortage.
Step-by-step explanation:
The question at hand is related to the concept of market equilibrium, which exists in the context of Economics within the umbrella of Business studies. At a given price point, the market may either experience a surplus or a shortage depending on whether the quantity supplied exceeds the quantity demanded or vice versa. If the product's price is set at $15 and there is a shortage of 4 units, this suggests that the quantity demanded exceeds quantity supplied by 4 units at that price. Equilibrium quantity is reached when the quantity demanded equals the quantity supplied, meaning there is neither surplus nor shortage.
When the price is above the equilibrium level, generally a surplus is expected because the quantity supplied will exceed the quantity demanded, while a price set below the equilibrium level would result in a shortage due to higher demand than supply. This relationship is due to the law of supply, which states that higher prices incentivize producers to supply more, and the law of demand, which suggests consumers will buy less at higher prices. If the price was $120, the actual quantities demanded and supplied would have to be given to determine the exact surplus or shortage, but based on the principle, we can anticipate a surplus since it is significantly higher than the previous price point.