In Alabama, those who hunt and kill alligators for commercial purposes (that is, to sell them) must have a license.  The state government places a limit on the number of commercial licenses it issues. For purposes of this question, assume that the number of wild alligators roaming around Alabama is unlimited.   Suppose that the demand for Alabama alligator sausage increases.   In the short run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Explain your answers.   In the long run, what will happen to the price of Alabama alligator sausage, the profits of Alabama alligator sausage producers, and the number of Alabama alligator sausage producers? Compare the long-run equilibrium to the equilibrium that existed before the increase in demand. Explain your answers.

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Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.