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EXCESS RESERVES: The amount of bank reserves over and above those that the Federal Reserve System requires a bank to keep. Excess reserves are what banks use to make loans. If a bank has more excess reserves, then it can make more loans. This is a key part of the Fed's ability to control the money supply. Using open market operations, the Fed can add to, or subtract from, the excess reserves held by banks. If the Fed, for example, adds to excess reserves, then banks can make more loans. Banks make these loans by adding to their customers' checking account balances. This is of some importance, because checking account balances are an major part of the economy's money supply. In essence, controlling these excess reserves is the Fed's number one method of "printing" money without actually printing money.

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QUANTITY:

The amount of a commodity (good, service, or resource) that is produced, consumed, bought, sold, or exchanged. The quantity of a commodity is often the focus of economic analysis. It takes center stage in the market model, as well as the theories of short-run production and consumer demand theory. In the standard market diagram, as well as most other analyses, quantity is displayed on the horizontal axis.
Quantity is a key variable in the study of economics. Economic analysis is frequently concerned with the amount of a good that is produced, consumed, or exchanged. Quantity is a generic notion that can take many specific forms.
  • It could be used to represent the exchange of a tasty consumer good, like Hot Momma Fudge Bananarama Ice Cream Sundaes.

  • It could be used to represent the employment of a key productive input, like the fiber filling used to fluff up Wacky Willy Stuffed Amigos.

  • It could be used to represent the generation of hazardous waste materials, such as that discharged by the Mona Mallard Duct Tape factory in the course of producing duct tape.

Addressing Scarcity

One reason for a keen interest in quantity is the pervasive problem of scarcity. Scarcity, as a general rule, is less of a problem when a larger amount of wants-and-needs-satisfying goods and services are available. If, for example, people are hungry, then a larger quantity of food provides greater satisfaction.

The Market Exchange

The standard market model presented in this exhibit, illustrates the role quantity plays in market exchanges. Quantity measures the amount of the commodity being exchanged. The quantity of the good exchanged is measured on the horizontal axis and the price of the good is measured on the vertical axis.

A Quantity From Each Side

The ultimate goal of a market is to bring buyers and sellers together to exchange a good. Buyers are likely to have one view on the quantity of the good to exchange, and sellers have another view. This results in two related quantity terms.
  • Quantity Demanded: On the demand side of a market, the amount of a good that buyers are willing and able to purchase at a given price is the quantity demanded. Should the price change, then buyers are likely to demand a different quantity.

  • Quantity Supplied: On the supply side of a market, the amount of a good that sellers are willing and able to sell at a given price is the quantity supplied. Should the price change, then sellers are likely to supply a different quantity.

One Equilibrium Quantity

Equilibrium quantity results when the quantity demanded and quantity supplied are equal. This equality means that buyers buy all of the good they want and sellers sell all that they want. It also means that the market has achieved equilibrium. In equilibrium, market shortages or surpluses have been eliminated.

A Market Without Balance

If the quantity demanded is not equal to the quantity supplied, then a market is faced with either a shortage or a surplus.
  • Shortage: A shortage arises if the quantity demanded is greater that the quantity supplied, at a given price. In this case, buyers are not able to buy as much of the good as they would like. The price is likely to rise to restore balance. The higher price causes a decrease in quantity demanded and an increase in quantity supplied, both of which act to eliminate the shortage.

  • Surplus: A surplus arises if the quantity demanded is less that the quantity supplied, at a given price. In this case, sellers are not able to sell as much of the good as they would like. The price is likely to fall to restore balance. The lower price causes an increase in quantity demanded and a decrease in quantity supplied, both of which act to eliminate the surplus.

QUANTITY DEMANDED =>


Recommended Citation:

QUANTITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: October 22, 2020].


Check Out These Related Terms...

     | exchange | voluntary exchange | price | market demand | market supply | Marshallian cross |


Or For A Little Background...

     | market | competitive market | allocation | economic thinking | scarcity | opportunity cost | production | variables | good | service |


And For Further Study...

     | second rule of subjectivity | fourth rule of competition | seven economic rules | incentive | invisible hand | three questions of allocation | satisfaction | value | comparative statics | economic analysis | market-oriented economy | real gross domestic product | utility analysis | short-run production analysis | elasticity | short-run production analysis | consumer demand theory | factor market analysis |


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