When would suppliers recognize there is a shortage in the market for their product?

Question

Quizplus · Accepted Answer

If suppliers notice that their inventories are falling, it means that they are selling their products faster than they are able to produce them, which may indicate a shortage in the market. A decrease in inventories is a strong indication that demand is exceeding supply, and suppliers may respond by increasing production or raising prices. Option A is incorrect because it indicates an excess supply, which is the opposite of a shortage. Option B is incorrect because a fall in demand would not necessarily indicate a shortage if supply is also falling in tandem. Option D is incorrect because production exceeding new orders could still result in excess supply if demand is not strong enough to absorb the surplus.

When Would Suppliers Recognize There Is a Shortage in the Market