Commodity deficit and commodity surplus: definition and consequences

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

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 is a commodity shortage and surplus, as well as the mechanisms for their appearance and elimination are discussed below.

Basic concepts

The ideal situation in the market is the same amount of goods offered for sale, and buyers who are ready to purchase it at a set price. This correspondence of supply and demand is called market equilibrium. The price that is established under such conditions is also called the equilibrium price. However, such a situation can occur only at a single moment in time, but is not able to persist for a long period. The constant change in supply and demand, due to many variable factors, causes either an increase in demand or an increase in supply. So there are phenomena called commodity shortages andcommodity surplus. The first concept defines the excess of demand over supply, and the second - just the opposite.

Appearance and elimination of market-wide deficiencies

The main reason why a commodity shortage 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 process of the state or insurmountable specific factors (wars, natural disasters, natural disasters, etc.), the market is able to independently regulate this process. It looks like this:

1. Demand is increasing and there is a shortage of goods.
2. The equilibrium price rises, which pushes the producer to increase output.
3. The number of goods on the market is increasing.
4. There is a commodity surplus (surplus).
5. The equilibrium price falls, triggering a reduction in output.
6. The state of supply and demand is stabilizing.

Such processes occur in the market continuously and are part of the country's economic system. However, if there is a deviation from the scheme outlined above, 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 another, an increase in public discontent, the appearance of shadow schemes for production, supply and sale, etc.

An example from the recent past

Commodity deficit may alsoalso arise for reasons of excessive interference in market processes, which often takes place in a planned or command economy. A striking example of this is the lack of food and food products in the 1980s in the USSR. Too extensive, busy and completely inflexible system of planning production and purchases, along with the growth of the welfare of the population and the availability of free cash, led to the fact that the store shelves were empty, and huge queues lined up for any product, if available. Manufacturers did not have time to meet the needs of the consumer, as they were not able to quickly respond to demand - all processes were strictly subordinated to bureaucratic procedures that lasted too long and could not meet market requirements. Thus, for a sufficiently long period of time, a constant commodity deficit was established on the scale of the market of the whole country. It is difficult for a command economy to cope with this phenomenon due to the factors listed above, so the problem can be solved either by a complete restructuring of the system, or by changing it.

A phenomenon in microeconomics

Commodity deficit can occur not only on the scale of the economy of the whole country, but also in individual enterprises. It can also be 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 production response to market changes is also important. On theAt the microeconomic level, a shortage of goods has a number of consequences: loss of profits, the likelihood of losing both regular and potential buyers, and deterioration of reputation.

Causes and consequences of the surplus

Excess supply of any product or group of goods over demand causes surpluses. This phenomenon is also called a surplus. The appearance of surpluses in a market economy is a natural process - a consequence of imbalance - and is independently regulated in the following way:

1. Decrease in demand or excess supply.
2. The emergence of a surplus.
3. Decrease in market price.
4. Decrease in output and supply.
5. Rising market price.
6. Stabilization of supply and demand.

In a planned economy, commodity surpluses are the result of incorrect forecasting. Since such a system is unable to self-regulate due to excessive intervention, the surplus can last long enough without the possibility of its settlement.

Enterprise-wide surplus

Surplus within a single enterprise also exists. Commodity deficit and surplus in microeconomics are not regulated by the market, but “manually”, i.e. primarily through planning and forecasting. If errors are made in these processes, then products not sold on time form surpluses that can lead to monetary losses. This is especially acuteconcerns grocery enterprises and others, the period of sale of goods of which is short. Also, a surplus can cause significant harm to the financial stability of industries whose products are seasonally dependent.

It is impossible to solve the problem of the balance of supply and demand once and for all either on a national scale or within an individual enterprise. In addition, such a decision is not required, since shortages 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.