prolonged shortages arise if: This is a topic that many people are looking for. khurak.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, khurak.net would like to introduce to you Surplusses & Shortages – an Introduction. Following along are instructions in the video below:
“Folks today we re going to focus on surpluses and shortages. And those are situations situations in the market. Where several things may have happened so we ve had an in quote. In demand.
We ve had an increase in supply or decrease in supply or demand. And yet. The market price for whatever reason has not changed and that results in a disequilibrium. Results in too much in the market.
Which is a surplus leftover stuff or it results in in too. Little in the market. Which is a situation. We call a shortage.
Which is two to two little stuff not enough to go around for everybody we re going to see why that happens right now we re starting off analyzing our market here. We re going to we re going to start with the with the flashlight market. Where we have demand for flashlights. We have the supply of flashlights.
We have an initial equilibrium here vq initial price of p and an initial price of q..
Now i m going to do two things number one. I m going to assume that a hurricane is is coming through in the in the us. South. And we would like to see what happens to flashlights.
But i m going to also put a little wrinkle in here to our usual kept our assumption. I m going to assume that even though the hurricane is coming through the supermarket. That sells flashlights has not had time to adjust their price to whatever. It is that we re going to see that happens here market.
So remember those two things news flash that the hurricane is coming. What do people do well. Is that a demand issue air supply issue first of all we think well. It doesn t really affect supply it might on down the road.
If we re actually producing flashlights in that part of the united states is going to be affected by the hurricane. But initially it s going to be a demand issue. How do people respond. They re going to need more flashlights that are going to need more batteries they re going to stock up on things like water and so forth so in this particular case.
The news flash..
It said that a hurricane is coming our demand for flashlights is going to increase it will shift from d. The initial position to d. One and we know based on our analysis that what should happen in the absence of any kind of interference. Is that the market price should automatically float up from p to p.
One and a market quantity should in this case automatically increase from q to q 1. But what happens remember my initial assumption what happens if the supermarket doesn t adjust their prices. If the price remains at p. Then we that price intersects our supply at this particular point q.
But it now intersects our new demand. Curve d1. At this point. Which i ll call q.
2. Well what is that here s what that means at this constant. Held price this price. The supermarket hasn t moved.
Only this much is being supplied to this flashlight market only p..
Only. But the demand for flashlights at this price is way out here at q2 q2 is much greater than q. So we would say here that demand in this case is way outstripping supply. What is that difference right here.
The difference between q. And q. That is something that we call a shortage in other words. People are going to go to the market.
Wanting flashlights and they are not going to be able to get them so in this case. What has caused the shortage. The shortage has been caused because the supermarket did not allow the price of the flashlight market to naturally float up to p1 and that resulted in a shortage. Very quickly let s diagram a surplus.
I m going to erase my market and recreate a new one and we re going to assume that this is the sugar market demand for sugar supply for sugar initial equilibrium q and p. I want to assume very quickly here that there s been a technological improvement in the production of sugar that allows sugar producers to produce mushroom more efficiently that that means that they can produce a lot more and have the same reason with the same resources that they have before an increase in productivity. What happens to them to the market for sugar. If we have that kind of increase in productivity and yet be the market price is not allowed to float up let s start float down let s see what happens in this case.
An increase in productivity in sugar is going to result in an increase in supply from ss one we know from our analysis that the market price should have floated down to p1 and the market quantity should have increased to q2 q1..
But if it didn t if for whatever reason. Supermarkets held a price constant here at p. Then our our price is intersecting our demand here q. But it s intersecting our new supply curve wait out here at something i would call q2.
So what that mean it means that this artificially now high price. Only q is demanded. But in this artificially. Surprised artificially high supply producers are much more willing to have a lot of extra supply available for people so this amount q2 is available in the market.
What is that difference here supply is outstripping demand. Q. Is is much greater than q. While that is called a surplus.
If the supermarket does not lower their price of the sugar in this particular case. They re going to have unsold material. We re going to have some more practice problems on that and i hope that made sense. ” .
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