When a virtual machine is configured with resources that are insufficient for the demands of the applications it's running, the performance will likely suffer. This is because virtual machines rely on the allocation of host resources, such as CPU time, memory, disk space, and network bandwidth, to operate effectively. If these resources are not adequately provided, the virtual machine cannot maintain efficient performance. On the other hand, over-allocating resources can lead to waste and reduced availability of resources for other virtual machines.