What is a market (commodity) deficit? When does he appear? Is a commodity shortage possible in a market economy? These, as well as a number of other questions, will be answered in the framework of the article.
general information
Let's first determine what constitutes a market deficit. This is the name of the situation when quantitatively demand exceeds supply at a given price level. The phrase may seem difficult to understand, so let's take it apart.
In the market for each product a certain price is set at which it is sold. When demand exceeds supply, the goods are bought up quickly, and it disappears from the shelves. And sellers usually take advantage of the situation, increasing the price. Producers stimulated by income growth begin to produce more scarce goods. In this case, over time, a market equilibrium will be established.
Further, two scenarios are possible. If the trend continues, the situation may become problematic again, and consumers will again suffer from a shortage of the specified product, and the price will rise. Or the market will be saturated, the rush demand for the product will disappear, which will lead to a drop in value and a reduction in the range of products on the market. Potentially, this situation may lead to a “crisis of overproduction.”
Thus, sellers can realize their interests in making profit only for a limited time. It is believed that the economy is optimal is a market equilibrium. Then in the list of desired market conditions there is an excess and deficit. The main focus of the article will be given only to the last of them, but for the sake of completeness of the presentation of information we will touch upon other topics. After all, what is market equilibrium, surplus and deficit, it is easiest to understand when a connection is made between them.
Time frame
Is a permanent deficit in a market economy possible? No, this is ruled out by the very principles of building a system. But it can persist for a long time, provided that the price increase is limited by certain factors. As such, we can name state regulation or the lack of physical capabilities to increase the output of goods. By the way, if there is a chronic market deficit, then this indicates that enterprises have no incentive to correct the situation or the state does not want to help them in this. In this case, one can observe a decrease in the standard of living, since people can no longer fully satisfy their needs with the help of goods.
Consequence of deficits
When such a situation occurs and the line begins to line up for the product, even if there is competition, the seller is not interested in improving the quality of his product and the level of service. For example, you can consider the situation with the Soviet Union in the last years of its existence. Shops started to work late, and finished relatively early. At the same time, there were always huge queues in them, despite which sellers were in no hurry to serve the buyer. This irritated buyers, resulting in ongoing conflicts. Another consequence that has a market deficit is the emergence of the shadow sector. When a product cannot be purchased at official prices, there will always be enterprising people who will look for ways to sell products at significantly higher prices.
Shadow market
We have already found out what deficit is. Now let's pay attention to the shadow market. It arises if there is unmet demand. In such conditions there are always those who want to satisfy it, but at inflated prices, which have nothing to do with officially declared. But here there is a framework - after all, the higher the cost, the less people will be able to afford a certain product or service.
Excess
This is the name of the market situation, which is characterized by an excess of supply over demand. Excess can occur in cases where there is a crisis of overproduction or a product (service) is offered at a price that the average citizen cannot pay. The occurrence of such a situation is possible due to state regulation (for example, establishing the minimum cost of a product).
Here, too, paradoxically as it sounds at first glance, a shadow market may arise. All that is needed is for some sellers to have incentives to sell their products at a lower price than officially established. In this case, the lower ceiling can be set at the cost price plus the minimum profitability at which the manufacturer agrees to produce goods or provide a service.
Market equilibrium
Deficit and excess have their pros and cons. The optimal situation is when an equilibrium price occurs. With it, supply is quantitatively equal to demand. Certain difficulties arise when one of these parameters changes. In such cases, there is a high probability of a loss of market equilibrium. Even more risky is the situation when they change at the same time. It should be borne in mind that market equilibrium, deficit and excess can quickly arise or disappear. So, when demand increases, it leads to the fact that the price is literally “pushed” in the direction of growth. Significant in quantitative terms, the proposal, in turn, puts pressure on top of the cost. Thus, a market equilibrium arises. There is no deficit / surplus in this case.
Features
So we found out what is the deficit in a market economy. Now let's look at situations where it may arise.
First of all, it is necessary to note the inefficient use of the state regulatory mechanism. In particular, price ceilings. We have already considered the minimum cost, but the most popular is the establishment of the upper limit. A similar mechanism is a popular element of social policy. Most often it is used in relation to essential goods. With this, everything is clear. But when can you see in action the limit (minimum level) of the price?
The state resorts to using this mechanism in cases where it is necessary to avoid a crisis of overproduction and the collapse following it. It can also be used to stimulate certain types of goods. In addition, all surpluses that were not bought by people in the market are acquired by the state itself. A reserve is formed from them, which will be used to regulate the situation in the event of a deficit. An example is food crisis.
Deficiency mechanism
Let's look at the situation, as there is a lack of supply of
goods and services. We can distinguish several of the most common schemes:
- Due to economic processes. So, there is an enterprise that has successfully entered the market. It offers a good and quality product that many people want to buy. But initially it cannot provide everyone, and there is a certain shortage of goods or services. Over time, they will be able to eliminate it and even create an excess. But the development of new proposals will call into question its further release. Therefore, if someone wants to buy an outdated sample of this product, then he will face a shortage. Its characteristic feature is that it will not be big.
- Due to a change in ownership. An example is the situation that arose during the collapse of the Soviet Union. After the creation of new states, old economic ties collapsed. At the same time, production largely depended on enterprises located in another territory. As a result, factories, factories and so on were idle. Since the necessary products were not manufactured in the required quantity, they gradually became smaller in the market. There was a shortage.
- "Intended" shortage. Occurs in cases when it is predetermined how much will be released and is no longer planned. As an example, “jubilee” books or expensive cars. In the case of the latter, you can bring the “Lamborghini”, individual models of which are produced in batches of several pieces and only once.
Conclusion
Market deficit is not a welcome guest in any state. It’s better to live in times of plenty. But alas, humanity has not yet grown to it. The best we can brag about is the equilibrium of prices. In addition, it is difficult to avoid short-term deficits during exacerbation of crises. If you carefully look at the current state of affairs, you can confidently say that we still have room to develop. Building an economic system that does not know negative aspects, such as crises and deficits, is a cherished dream of many people. Attempts to outline the path were undertaken by Karl Marx; one can find many modern doctrines that offer various mechanisms that can potentially help humanity on its path to abundance.