question archive How does a 'surplus' and a 'shortage' of a good affect the supply and price?  

How does a 'surplus' and a 'shortage' of a good affect the supply and price?  

Subject:EconomicsPrice:2.86 Bought3

How does a 'surplus' and a 'shortage' of a good affect the supply and price?

 

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Surplus is amount of an asset or resource that exceeds the portion that is actively utilized while shortage is a situation in which demand for a product or service exceeds the available supply causing the market to be in a state of disequilibrium. In situations of surplus existence, price falls in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eradicated. If a shortage exists, price  rises in order to entice additional supply and reduce quantity demanded until the shortage is eradicated.