Question

Are shortages and surplus possible for very long under a market system? Why or why not?...

Are shortages and surplus possible for very long under a market system? Why or why not? Can you provide examples of shortages and surpluses?

Homework Answers

Answer #1

We know that the market surplus means that supply of goods greater than the demand for the goods. On the same way, the shortages existed in the market which means that the demand for the goods greater than the supply of goods. If a surplus existed in the market, then the price of a commodity falls and price rise if market faces shortages. If shortages existed then market scarcity will occur. To control the surplus and shortages can be controlled by the actions of government.

Examples:

Surplus- at the time of bumper harvest the vegetable price is reduced because of higher production.

Shortages- if drought occurs then the production of the commodity will reduce and creates market shortages.

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