What is the term for a market situation in which quantity supplied is greater than quantity demanded?

• A. Shortage
• B. Surplus
• C. Complementary goods
• D. Decay

Answer: (B)

This situation is a surplus. It happens when the price is high enough that sellers are willing to produce and offer more goods than buyers want to purchase at that price. In other words, quantity supplied exceeds quantity demanded. Markets correct a surplus by pushing the price down, which encourages more buying and/or reduces production, until the amount offered by sellers matches the amount buyers want. For contrast, a shortage occurs when buyers want more than sellers are willing to offer at the current price, pushing the price up to restore balance.