Question

write a paper of 300- 600 words presenting your analysis of the following topic- discuss shortages and surpluses and how they re-direct resources

Answer 1

Scarcity and surplus coexist in the market, but it can be reallocated by using many interventions. But before that let us understand what is this shortage and surplus.

A Surplus occurs when there is excess supply- that is quantity supplied is greater than quantity demanded. In this situation, not all the goods will be sold. And it will be lying ideally. This will induce them to lower their price to make their product more appealing. In this situation, excess supply has exerted downward pressure on the price of the product.

A Shortage occurs when there is excess demand- that is quantity demanded is greater than quantity supplied. In this situation, consumers won't be able to buy as much of a good as they would like. In response to the demand of the consumers, producers will raise both the price of their product and the quantity they are willing to supply. The increase in price will be too much for some consumers and they will no longer demand the product.

Apart from this there are other factors which also play a role in shortage and surplus. Like Geographical region also plays a role, some places may have surplus of some resources and others may have shortage of that particular resource.

But this problem can be curbed easily with the reallocation of resources. With the free trade concept, and easy labour transfer, the world has become a very small place. Transportation is through so many means that surplus resources can be easily transferred form one region to other and keep the market in equilibrium.

One example was the U.S. government's surplus cheese redistribution program which helped to nullify the surplus and the shortage in different region of US. Other can be the OPEC petroleum which is transferred worldwide.