As you know, the market, in the economic sense of the word, works according to certain rules and laws that regulate supply and demand, price, shortage of goods or its surplus. These concepts are key and affect all other processes. What are commodity shortages and surpluses, as well as the mechanisms of their appearance and elimination are discussed below.
Basic concepts
An ideal market situation is the same amount of goods offered for sale and buyers who are ready to purchase it at a set price. This correspondence between supply and demand is called market equilibrium. The price that is set under such conditions is also called equilibrium. However, such a situation can occur only at a single point in time, but is not able to persist for a long period. A constant change in supply and demand due to many variable factors causes either an increase in demand or supply. So there are phenomena called commodity shortages and surplus goods. The first concept determines the excess of demand over supply, and the second is the exact opposite.
The emergence and elimination of shortcomings in the market
The main reason that a shortage of goods occurs at a certain point in time is a sharp increase in demand, to which supply does not have time to respond. However, with non-interference in the state process or insurmountable specific factors (wars, natural disasters, natural disasters, etc.), the market is able to independently regulate this process. It looks like this:
- Demand is increasing and commodity shortages are arising.
- The equilibrium price rises, which pushes the manufacturer to increase production volumes.
- The quantity of goods on the market is increasing.
- There is a surplus of goods (surplus).
- The equilibrium price falls, which initiates a reduction in production volumes.
- The state of supply and demand is stabilizing.
Such processes occur on the market continuously and are part of the country's economic system. However, if there is a deviation from the above scheme, then regulation does not occur, the consequences can be very complex: a constant and significant shortage of goods of one group and an excess of the other, growing dissatisfaction of the population, the emergence of shadow patterns of production, supply and sale, etc.
An example from the recent past
A shortage of goods can also arise due to excessive interference in market processes, which often occurs in a planned or command economy. A striking example of this is the lack of grocery and food products in the 80s in the USSR. An overly extensive, overloaded and completely non-flexible system of production and procurement planning, together with an increase in the well-being of the population and the availability of free cash, led to the fact that the store shelves were empty, and long lines were lined up for any products. Manufacturers did not have time to satisfy the needs of consumers, because they did not have the ability to quickly respond to demand - all processes were strictly subject to bureaucratic procedures that lasted too long and could not meet market requirements. Thus, for a sufficiently long period of time on the scale of the market of the whole country, a constant shortage of goods was established. It is difficult for the team economy to cope with this phenomenon due to the factors listed above, therefore, the problem can be solved either by a complete restructuring of the system, or by changing it.
The phenomenon in microeconomics
A shortage of goods can arise not only on the scale of the economy of the whole country, but also at individual enterprises. It also happens both temporary and permanent, characterized by a lack of finished products to cover the demand for it. But unlike macroeconomic processes in the enterprise, the balance of stocks and demand, on the contrary, depends on the quality of planning. True, the speed of reaction of production to market changes is also important. At the microeconomic level, the commodity shortage has a number of consequences: lack of profit, the likelihood of losing both regular and potential buyers, and a deterioration in reputation.
Causes and consequences of surplus
Excess of the supply of a product or an entire group over demand causes surpluses. This phenomenon is also called surplus. The appearance of surplus in a market economy is a natural process - the result of an imbalance - and is independently regulated in the following way:
- Decrease in demand or excess supply.
- The appearance of surplus.
- Lower market prices.
- Reduced production and supply.
- Market price increase.
- Stabilization of supply and demand.
In a planned economy, commodity surpluses are the result of incorrect forecasting. Since such a system is incapable of self-regulation due to excessive interference, the surplus can last long enough without the possibility of its settlement.
Enterprise-wide surplus
Surplus within a single enterprise also exists. The commodity deficit and surplus in microeconomics are not regulated by the market, but “manually”, i.e. using, first of all, planning and forecasting. If mistakes are made in these processes, then not sold products on time will generate surpluses that can lead to monetary losses. This is especially acute for food enterprises and others whose goods are short-lived. A surplus can also significantly damage the financial stability of industries whose products are seasonally dependent.
It is impossible to solve the problem of equilibrium of supply and demand once and for all, either nationwide or within a single enterprise. In addition, such a solution is not required, since deficits and surpluses are important processes that, among other things, stimulate the development of the economy and production, as well as interstate trade and relations in the context of exports and imports.