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.
Q. What happens to supply and demand during a shortage?
A shortage is a situation in which demand for a product or service exceeds the available supply. When this occurs, the market is said to be in a state of disequilibrium. Usually, this condition is temporary as the product will be replenished and the market regains equilibrium.
Q. How does supply and demand result to shortage and surplus in the market?
A Market Surplus occurs when there is excess supply- that is quantity supplied is greater than quantity demanded. In this situation, excess supply has exerted downward pressure on the price of the product. A Market Shortage occurs when there is excess demand- that is quantity demanded is greater than quantity supplied.
Q. How do you deal with shortage and surplus?
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.
Q. When there is a decrease in demand and a decrease in supply?
If both demand and supply decrease, there will be a decrease in the equilibrium output, but the effect on price cannot be determined. 1. If both demand and supply decrease, consumers wish to buy less andfirms wish to supply less, so output will fall.
Q. Why the price adjusts following an increase in supply?
Which of the following is the best explanation of why the price adjusts following an increase in supply? at the initial price, there will be a surplus after supply increases. Prices must fall until the quantity demanded and the quantity supplied are equal again.
Q. What happens when supply exceeds demand?
A shortage occurs when demand exceeds supply – in other words, when the price is too low. A surplus occurs when the price is too high, and demand decreases, even though the supply is available. Consumers may start to use less of the product, or purchase substitute products.
