Final answer:
The quantity Q1 where a good or service is currently being produced is known as the equilibrium quantity, where the quantity demanded equals the quantity supplied. A shortage represents excess demand, while a surplus indicates excess supply. These are key concepts in understanding market dynamics and price determination.
Step-by-step explanation:
The amount of a good or service currently being produced at a specific quantity, which we are calling Q1, can be best represented by the concept of equilibrium. Equilibrium in the context of supply and demand is a state where the quantity demanded is equal to the quantity supplied for a certain price level. This point is found where the demand curve, which graphically displays the relationship of price to the quantity demanded (Qd), intersects with the supply curve, which shows the relationship of price to the quantity supplied (Qs).
A state of shortage occurs when there is excess demand at the existing price, meaning the quantity demanded exceeds the quantity supplied. Conversely, a surplus is when there is excess supply at the existing price and quantity supplied exceeds quantity demanded. These concepts are all critical to understanding how markets work and how prices are determined through the interaction of consumers and producers.