Google
Friday 
April 28, 2017 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
Today's Index
Yesterday's Index
338.9

Help us compile the AmosWEB Free Lunch Index. Tell us about your last lunch.

Skipped lunch altogether.
Bought by another.
Ate lunch at home.
Brought lunch from home.
Fast food drive through.
Fast food dine in.
All-you-can eat buffet.
Casual dining with tip.
Fancy upscale with tip.

More About the Index
Greatest Ben actor?

Kingsley.
Affleck.
Stiller.
Johnson.
Vereen.
Murphy.

KEYNESIAN EQUILIBRIUM: The state of the macroeconomy in which aggregate expenditures are equal to aggregate output. This is illustrated using the income-expenditure model, or Keynesian cross, as the intersection of the aggregate expenditures line and the 45-degree line. The aggregate expenditures line is the summation of consumption expenditures, investment expenditures, government purchases, and net exports. The 45-degree line represents all combinations in which aggregate expenditures equal aggregate output. Keynesian equilibrium is also represented by the saving-investment, or injection-leakage, model as the intersection between the injection line (investment expenditures, government purchases, and exports) and the leakage line (saving, taxes, and imports).

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, 2000-2017. [Accessed: April 28, 2017].


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

State of the ECONOMY

Business Inventories
October 2016
$1,814.5 billion
Up 2% from Oct. 2015: Econ. Stat. Admin.

More Stats

GRAY SKITTERY
[What's This?]

Today, you are likely to spend a great deal of time watching infomercials hoping to buy either a set of tires or a birthday gift for your grandfather. Be on the lookout for malfunctioning pocket calculators.
Your Complete Scope

This isn't me! What am I?

A U.S. dime has 118 groves around its edge, one fewer than a U.S. quarter.
"Nothing is a waste of time if you use the experience wisely. "

-- Auguste Rodin, Sculptor

MP
Marginal Product
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 ©2000-2017 AmosWEB*LLC
Send comments or questions to: WebMaster