What is it called when the amount supplied exceeds the amount demanded?

What is it called when the amount supplied exceeds the amount demanded?

• A. Law of Comparative Advantage
• B. Shortage
• C. Surplus
• D. Equilibrium Price

Answer: (C)

When the amount supplied exceeds the amount demanded, the situation is referred to as a surplus. This occurs when producers create more of a good or service than consumers are willing to purchase at a given price, leading to excess inventory. A surplus can indicate that the price of the good or service may be too high, prompting sellers to lower prices to stimulate demand and bring the market back toward equilibrium. In contrast, the law of comparative advantage relates to the benefits of specialization and trade rather than supply and demand dynamics. A shortage occurs when demand exceeds supply, creating a scenario where consumers cannot purchase enough of the good or service at the prevailing price. Equilibrium price is the point at which supply and demand are equal, meaning there is neither a surplus nor a shortage. Therefore, in this context, surplus accurately describes the condition where supply surpasses demand.

When the amount supplied exceeds the amount demanded, the situation is referred to as a surplus. This occurs when producers create more of a good or service than consumers are willing to purchase at a given price, leading to excess inventory. A surplus can indicate that the price of the good or service may be too high, prompting sellers to lower prices to stimulate demand and bring the market back toward equilibrium.

In contrast, the law of comparative advantage relates to the benefits of specialization and trade rather than supply and demand dynamics. A shortage occurs when demand exceeds supply, creating a scenario where consumers cannot purchase enough of the good or service at the prevailing price. Equilibrium price is the point at which supply and demand are equal, meaning there is neither a surplus nor a shortage. Therefore, in this context, surplus accurately describes the condition where supply surpasses demand.