Google
Monday 
May 21, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
BILATERAL MONOPOLY: A market containing a single buyer and a single seller. Bilateral monopoly is the combination of a monopoly market on the selling side and a monopsony market on the buying side. Factor markets tend to offer the best examples of bilateral monopolies, and thus is the field of economic analysis where this term generally surfaces. A market dominated by a profit-maximizing monopoly tends to charge a higher price. A market dominated by a profit-maximizing monopsony tends to pay a lower price. When combined into a bilateral monopoly, the buyer and seller are forced to negotiate a price. Then resulting price could end up anywhere between the higher monopoly's price and the lower monopsony's price. Where the price ends ups depends on the relative negotiating power of each side.

Visit the GLOSS*arama


SURPLUS:

A condition in the market in which the quantity demanded is less than the quantity supplied at the existing price. Because sellers are unable to sell as much of the good as they want, a surplus generally causes a decrease in the market price, which then acts to restore equilibrium. A surplus, which also goes by the terms excess supply and buyers' market, is one of two basic states of disequilibrium for the market. The other is shortage.
A surplus exists in a market when the current market price is greater than the equilibrium price. Acting on the law of demand and law of supply, the relatively high price generates a smaller quantity demanded and a larger quantity supplied than needed for equilibrium. In other words, when the price is relatively high, sellers want to sell a lot more of the good than buyers want to buy.

A market surplus can be caused by a change in any of the demand determinants or supply determinants. A decrease in demand or an increase in supply does the job. A surplus also can be imposed on a market through government intervention, especially by establishing a price floor above the equilibrium price.

Working the Market

The Surplus
A surplus can be illustrated using the market for 8-track tapes displayed in this exhibit. This graph was generated after long hours attending the 88th Annual Trackmania 8-Track Tape Collectors Convention at the Shady Valley Exposition Center.

The equilibrium, found at the intersection of the negatively-sloped demand curve and positively-sloped supply curve is at a price of 50 cents and a quantity of 400 tapes. Equilibrium, however, is not the primary point of interest. The interest lies in disequilibrium and surplus.

A surplus emerges at any price above the equilibrium price of 50 cents. A prime candidate to generate a surplus is a price of 70 cents. Click the [Surplus] button to illustrate the resulting surplus.

  • Quantity Supplied: At 70 cents, the quantity supplied is 600 tapes. Because the price is relatively high, sellers are guided by the law of supply and are willing and able to offer a great deal of the good for sale.

  • Quantity Demanded: However, at the same 70 cent price, the quantity demanded is 200 tapes. At this relatively high price, buyers act according to the law of demand and are willing and able to buy a small amount of the good.

  • The Surplus: The end result is that the quantity supplied exceeds the quantity demanded by 400 tapes. As such, the surplus at 70 cents is 400 tapes. Of course, a different price generates a different surplus.

Then What?

Eliminating the Surplus
A market reacts in a specific manner in response to a surplus. Although buyers are able to buy as much of the good as they want at the going market price, sellers are not able to sell as much of the good as they want. In this example, buyers are able to buy all 200 tapes they want. Sellers, however, are only able to sell 200 of the 600 tapes they want. The sellers come up short by 400 tapes.

Because sellers are not satisfied with this surplus, because they cannot sell all of the tapes that they are willing and able to sell at 70 cents each, they are motivated to offer a lower price, to induce buyers to purchase a larger quantity. Click the [Price Fall] button to illustrate what occurs.

What happens as this price falls?

  • Increase in Quantity Demanded: According to the law of demand, a lower price induces an increase in the quantity demanded. This is just the sort of thing that the sellers hope happens when they charge a lower price. They want a larger quantity demanded.

  • Decrease in Quantity Supplied: However, according to the law of supply, a lower price also induces a decrease in the quantity supplied. Sellers who supply a large quantity at the 70 cent price are inclined to reduce their quantity supplied as the price falls.

  • No More Surplus: The increase in the quantity demanded and the decrease in the quantity supplied both act to eliminate the surplus. Best of all, as long as any surplus exists, the price continues to fall, and the surplus shrinks. The price stops falling ONLY when it reaches 50 cents, which is the equilibrium price, the price that generates the same quantity demanded as supplied. It is the price that does not have a surplus.

<= SUPPLY TO A FIRMSURVEY WEEK, CURRENT POPULATION SURVEY =>


Recommended Citation:

SURPLUS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: May 21, 2018].


Check Out These Related Terms...

     | shortage | excess demand | excess supply | sellers' market | buyers' market | market disequilibrium | disequilibrium price | market equilibrium | equilibrium price | equilibrium quantity |


Or For A Little Background...

     | market | demand determinants | supply determinants | equilibrium | law of demand | law of supply | market clearing |


And For Further Study...

     | market equilibrium, numerical analysis | market equilibrium, graphical analysis | competitive market | self correction, market | unemployment | macroeconomic markets | price floor |


Search Again?

Back to the WEB*pedia


APLS

ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time touring the new suburban shopping complex hoping to buy either a how-to book on home decorating or a set of luggage with wheels. Be on the lookout for poorly written technical manuals.
Your Complete Scope

This isn't me! What am I?

Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
"Many people think that if they were only in some other place, or had some other job, they would be happy. Well, that is doubtful. So get as much happiness out of what you are doing as you can and don't put off being happy until some future date. "

-- Dale Carnegie

SAS
Statistical Analysis Software
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster