Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 3: Problem 2

What do economists mean by shortage? By surplus?

Short Answer

Expert verified
In economics, a shortage is a situation where the demand for something exceeds its supply, causing potential price increases or rationing. A surplus, on the other hand, happens when supply exceeds demand, leading potentially to price decreases, waste, or stockpiling.

Step by step solution

01

Understanding Shortage

A shortage in economics refers to a situation where the demand for a particular product or service exceeds its supply in a market. This usually happens when the product or service is highly desirable, but its production or availability cannot keep pace with the high demand. Shortages can lead to price hikes and/or the necessity for rationing.
02

Understanding Surplus

A surplus, on the other hand, occurs when the supply of a certain good or service is more than the demand for it. Surpluses often result when producers overestimate the demand for their product or service, producing too much as a result. The product or service is not scarce, but there's not enough demand for it. Surpluses could lead to price decreases, waste or stockpiling.
03

Contrasting Shortage and Surplus

Shortage and Surplus are two sides of the same coin. They both represent an imbalance but on opposite directions between supply and demand. In shortage, demand exceeds supply while in surplus, supply exceeds demand. They have different effects on price and quantity in the market.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Briefly explain whether each of the following statements describes a change in supply or a change in quantity supplied. a. To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to increase output. b. The success of Pepsi's LIFEWTR and Coke's smartwater leads more firms to begin producing premium bottled water. c. In the six months following the Japanese earthquake and tsunami in 2011 , production of automobiles in Japan declined by 20 percent.

What do economists mean by market equilibrium?

According to an article in the Wall Street Journal, in early 2017, President Donald Trump was considering whether to reverse a requirement by the Environmental Protection Agency that oil refiners increase the amount of ethanol they blend with gasoline. If the requirement were to remain, the result would be an increase in demand for ethanol, which is made from corn. Many U.S. farmers can use the same acreage to grow either corn or soybeans. Use a demand and supply graph to analyze the effect on the equilibrium price of soybeans resulting from an increase in the demand for corn.

A news article about virtual reality headsets observed, "For any hardware platform, it is critical to attract outside developers and build a virtuous cycle in which popular software titles drive hardware sales, which in turn brings in more software developers." The article referred to two types of software: games, such as Final Fantasy, that were already available for video game consoles, and software intended only for use with virtual reality headsets. As both these types of software become available, are they likely to make virtual reality headsets closer or less close substitutes for video game consoles? Briefly explain. Source: Takashi Mochizuki, "Sony's Virtual-Reality Headset Confronts Actual Reality of Modest Sales," Wall Street Journal, February 27 , 2017

Historically, the production of many perishable foods, such as dairy products, was highly seasonal. As the supply of those products fluctuated, prices tended to fluctuate tremendously - typically by 25 to 50 percent or more - over the course of the year. One effect of mechanical refrigeration, which was commercialized on a large scale in the last decade of the nineteenth century, was that suppliers could store perishable foods from one season to the next. Economists have estimated that as a result of refrigerated storage, wholesale prices rose by roughly 10 percent during peak supply periods, while they fell by almost the same amount during the off season. Use a demand and supply graph for each season to illustrate how refrigeration affected the market for perishable food.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free