Shortage (Excess Demand) vs Surplus (Excess Supply)
Shortage (Excess Demand) and Surplus (Excess Supply) are two Supply & Demand concepts in AP Economics that students often mix up. In short: shortage (excess demand) is a shortage occurs when quantity demanded exceeds quantity supplied at a given price. Meanwhile, surplus (excess supply) is a surplus occurs when quantity supplied exceeds quantity demanded at a given price. Here is how they compare side by side.
A shortage occurs when quantity demanded exceeds quantity supplied at a given price.
A shortage, or excess demand, happens when consumers are willing to buy more than producers are willing to sell at the current price. This puts upward pressure on the price, as consumers compete to buy the scarce goods. The shortage will be eliminated as the price rises to the equilibrium level.
A surplus occurs when quantity supplied exceeds quantity demanded at a given price.
A surplus, or excess supply, happens when producers are willing to sell more than consumers are willing to buy at the current price. This puts downward pressure on the price, as producers compete to sell their excess goods. The surplus will be eliminated as the price falls to the equilibrium level.
Get AP Econ exam tips in your inbox
Occasional emails with study tips, new interactive graphs, and exam-season reminders. Free — no spam.
No spam. Unsubscribe anytime.