A deficit spending unit is an economic term used to describe how an economy, or an economic group within that economy, has spent more than it has earned over a specified measurement period. When a deficit spending unit is an entire country, it is often forced to borrow from countries that operate as surplus spenders.

A budget surplus is when extra money is left over in a budget after expenses are paid. A budget deficit occurs when the federal government spends more money that it collects in revenue.

E.g. you place funds in the bank (you are a surplus unit), your parents when they took out a housing loan (they are a deficit unit). Companies that raise funds to invest in a new factory are deficit units.

A surplus economic unit is an institution that makes more money than it spends. The extra money is a profit to either save or invest. Deficit economic units differ by spending more money than they make. They function by balancing money receipts with money expenditures and by obtaining extra money from additional units.

By running a deficit, a government is able to spread distortionary taxes over time. Also, a deficit allows a government to allocate tax obligations across generations of citizens who all benefit from some form of government spending. Finally, stabilization policy often requires the government to run a deficit.

Understanding Surplus Spending Units A surplus spending unit earns more than it spends. Surplus spenders can be individuals, sectors, countries, or even a whole economy. When a surplus spending unit is an entire country, it can benefit the global economy by investing in and lending to deficit spending countries.

Surplus units are those units who receive more money than they spend. They can be termed as investors. They provide their net savings to the financial markets while deficit units are those units who spend more money than they received. They are also termed as borrowers.

Potential drawbacks of a budget surplus

• If taxes > government spending, this is a net leakage from the circular flow of income which can have a deflationary effect on real GDP.
• Fiscal austerity to achieve a budget surplus can have damaging effects on the quality of public services and might increase inequality.

A lower consumer surplus leads to higher producer surplus and greater inequality. Consumer surplus enables consumers to purchase a wider choice of goods.

Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded—that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.

Shortage = Quantity demanded (Qd) > Quantity supplied (Qs) A surplus occurs when the quantity supplied is greater than the quantity demanded.

Consumer surplus is their willingness to pay minus the price they pay, and producer surplus is the price they receive minus their willingness to receive. So if you are assuming that consumers are forced to buy at a price of 100, yes the consumer surplus is negative.

Surplus means in general that the sum or balance of positive and negative amounts is positive, or that the total of positives is larger than the total of negatives.

Deficit means in general that the sum or balance of positive and negative amounts is negative, or that the total of negatives is larger than the total of positives.

a) Consumer surplus is equal to the maximum amount a consumer is willing to pay for a good, minus what the consumer has to pay for the good.

If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.

Fortunately, the cycle of surplus and shortage has a way of balancing itself out. Sometimes, to remedy this imbalance, the government will step in and implement a price floor or set a minimum price for which a good must be sold.

If you’re looking at a surplus of merchandise in your store, there are several steps you can take to liquidate them:

1. Refresh, re-merchandise, or remarket.
2. Double or even triple-expose your slow-movers to sell old inventory.
3. Discount those items (but be strategic about it)
4. Bundle items.
5. Offer them as freebies or incentives.

A shortage occurs when the quantity demanded for a good exceeds the quantity supplied at a specific price. A surplus occurs when the quantity supplied of a good exceeds the quantity demanded at a specific price. If a market is not in equilibrium a situation of a surplus or a shortage may exist.

When the supply is less than demand, there will be shortage of goods and services. Therefore, the demand for it increases. Everything in excess is called excess capacity and it is not good for the industry and the market.

What represents a shortage in the market? Market price is less than equilibrium price.

15. When a surplus exists what should sellers do? When a shortage exists? When there is a surplus in the market, sellers respond by cutting prices, which in turn increase the quantity demanded & decrease the quantity supplied.

Market shortage is the imbalance where demand exceeds supply. The price mechanism is able to correct surplus or shortage without shifting demand or supply. To achieve a surplus, it should be adjusted to price floor set above the equilibrium price.

The supply and demand model is a static model; it is always in equilibrium, because it is closed with an equilibrium condition. Further, the model is supposed to represent a perfectly competitive market and so price adjustment by firms and households is precluded by assumption.

You are paying up to 40% extra when you fill up your tank because of the way the markets are structured: speculators are allowed to basically cause fake demand. …

Excess supply is the situation where the price is above its equilibrium price. The quantity willing supplied by the producers is higher than the quantity demanded by the consumers. Excess demand is the situation where the price is below its equilibrium price.