ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The surplus in the market occurs when the quantity supplied is greater than the quantity demanded. Quantity demand shows the willingness of the consumer to buy the product at a certain price. Quantity supplied shows the willingness of a producer to sell at the given price.

Detailed explanation-2: -Excess Demand: the quantity demanded is greater than the quantity supplied at the given price. This is also called a shortage. Excess Supply: the quantity demanded is less than the quantity supplied at the given price. This is also called a surplus.

Detailed explanation-3: -The equilibrium occurs where the quantity demanded is equal to the quantity supplied. If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist.

Detailed explanation-4: -Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded-that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.

Detailed explanation-5: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.