Economics, 3rd Edition

surplus

 or a 

shortage

. The market mechanism takes time to adjust – sometimes it can 

be very quick (which tends to happen in highly organized markets like stock and commodity markets) and 

sometimes it is much slower to react. When the market is in disequilibrium and a shortage or surplus 

exists, the behaviour of buyers and sellers act as forces on price.

surplus

 a situation in which the quantity supplied is greater than the quantity demanded at the going market price

shortage

 a situation in which quantity demanded is greater than quantity supplied at the going market price

When there is a surplus or excess supply of a good, suppliers are unable to sell all they want at the 

going price. Sellers find stocks of milk increasing so they respond to the surplus by cutting their prices.  

As the price falls, some consumers are persuaded to buy more milk and so there is a movement 

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58  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK