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Surplus

Definition

Surplus refers to the situation where the quantity supplied of a good or service exceeds the quantity demanded at a given price, resulting in excess supply. It represents an imbalance in the market where there is more of a product available than consumers are willing to purchase.

Analogy

Imagine you're hosting a party and you have way more pizza than your friends can eat. The surplus of pizza means there's extra left over that nobody wants, just like in economics when there's more supply than demand.

Related terms

Shortage: A shortage occurs when the quantity demanded of a good or service exceeds the quantity supplied at a given price, resulting in excess demand. It represents an imbalance in the market where there is not enough of a product available for consumers.

Equilibrium: Equilibrium is the state in which the quantity demanded equals the quantity supplied at a specific price level. It represents a balance between supply and demand, with no surplus or shortage.

Price Floor: A price floor is a government-imposed minimum price set above equilibrium, aiming to protect producers by preventing prices from falling too low. It often leads to surpluses as it creates excess supply.