Surplus

A surplus occurs when quantity supplied surpasses what is demanded. Sellers would try to lower the price in order to clear out their inventory before it turns into a bigger loss. For example you're selling TV's but since the release of that new wide screen plasma sets, your revenues went down because consumer's attention are now driven towards that new set. Because demand has been sluggish for what you're selling, In order to get rid of your remaining units before the rent or payroll is due you would throw out a huge sale lowering the price as much as 20% just to look for more demand at a now lower price.

Another instance is when selling perishable goods, you would try to find buyers before your items rot and bring revenues further down to zero. By increasing the quantity say 30 bushels to 40 keeping the same price or vice versa, buyers would be enticed to buy at a discount.


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