Download Shortages and Surpluses

Shortages and
Surpluses
 Businesses
have to figure out
what price to charge consumers
 Also, they have to try to figure out
how much of their product the
consumer will be willing to buy
 Computer
industry decides to
produce 400,000 laptops at a
price of $1200 each
 Processors are very fast, and the
accessories are very appealing to
the public
 Because
of the competitive price,
sales are very fast
 Orders pour in from around the
country for an astonishing
800,000 computers
 The
market is met with a
shortage
 Quantity demanded exceeded the
quantity supplied at the given
price
 $1200
price is too low for the
market
 Various companies decide to
raise the price of the computer to
decrease the consumer demand
and to maximize their profits
 Price
will be raised until a proper
equilibrium point is reached
A
surplus is when the demand
does not meet quantity supplied
 Same industry decides to produce
400,000 laptops and charge
$2000 per unit
 At
that price, sales are sluggish,
and consumers decide to buy
from other companies
 Management notices that there
are thousands of computers in the
warehouse
 Customers
balked at the price
 Company is forced to lower the
price to increase the amount of
sales
 They will drop the price until the
computers sell more briskly
 Matter
is urgent- company cannot
risk to have the machines
become outdated
Homework
 Find
an ad for a sale on a big
screen TV, stereo, or computer
(or other big ticket item)
 What were the initial prices
versus the sale prices?
 Was the store suffering from a
surplus or shortage?