Chapter 7, Problem 19AA

To determine

To ascertain: The graphic organizer by listing the way producers and consumers act during surpluses and shortage.

Explanation of Solution

	Producers	Consumers
Surpluses	The effect on surplus is that it lead to reduction in prices and the suppliers have less incentive to supply as much as before.	Where as consumers begin to purchase a greater quantity.
Shortages	There will be rise in the quantity of supply for the producers	Shortages make pressure on prices to increase. At higher price, consumers reduce their purchases.

When manufacturers have an over-supply, they have to sell the commodity at lower prices. Therefore, more buyers are going to purchase the product, now that it's cheaper. This leads to shortages of production, if manufacturers can not satisfy market demand.

Economics Concept Introduction

Introduction: A shortage is a situation in which demand for a product or service is greater than what is available. There is a market surplus when there is greater flow of products, which is larger than the required. The fall in price towards the equilibrium price, therefore, eliminates the surplus.