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Understanding what happens when there is too much of a product and not enough buyers.
Have you ever wondered why a toy that cost 5? It's not magic—it's the power of the surplus!
In economics, we look at two main things: Supply (how much of a product is available) and Demand (how much people want to buy it). Usually, stores try to keep these balanced. But sometimes, the supply is much higher than the demand. This extra amount of 'leftover' stuff is called a surplus.
Imagine a lemonade stand. You made 50 cups of lemonade, but only 10 thirsty neighbors came by to buy some. You have 40 cups left over. Those 40 cups are your surplus! We can show this with a simple equation:
If the result is a positive number, you have more items than buyers.
Quick Check
If a baker makes 30 loaves of bread but only sells 20, how many loaves are in the surplus?
Answer
10 loaves ()
Surpluses don't just happen by accident. They usually happen for three main reasons:
1. Overestimation: A store thinks a new video game will be a huge hit, so they order 1,000 copies, but only 200 people want it. 2. High Prices: If a toy is too expensive, people might wait for it to get cheaper, leaving the store with shelves full of unsold items. 3. Changing Trends: Think about 'fidget spinners.' One day everyone wanted one; the next day, the trend ended. The stores that still had boxes of them suddenly had a huge surplus because the demand vanished.
1. A store orders 100 heavy winter coats to sell in March. 2. Unexpectedly, the weather turns very warm and sunny (). 3. Because it is hot, only 5 people buy coats. 4. The store now has a surplus of coats taking up valuable shelf space.
Quick Check
Why might a store have a surplus of 'Back to School' folders in the month of October?
Answer
Because the main demand for school supplies ends once school has already started.
A surplus is actually a problem for stores. Unsold items take up space on shelves where new, popular items could go. To get rid of a surplus quickly, stores use a clearance sale.
When Supply is high and Demand is low, the Price almost always goes down. By lowering the price, the store makes the item more attractive to buyers. Even if they don't make as much money as they hoped, selling a toy for $5 is better than having it sit in the back room forever! This is why you see 'Buy One Get One Free' deals when a store has too much of something.
A store has 50 leftover drones that aren't selling at the original price of $100.
1. The manager sees that . 2. To create demand, they cut the price by half: . 3. At the lower price of $50, 50 new customers decide to buy them. 4. The surplus is cleared, and the store now has room for new products!
Which situation describes a surplus?
What is the most likely result of a large surplus of apples at a grocery store?
A surplus is generally a good thing for a store owner because it means they have a lot of products to show off.
Review Tomorrow
Tomorrow, try to explain to a friend why the 'Clearance' section in a store exists using the words 'Supply' and 'Demand'.
Practice Activity
Next time you go to a store, look for a 'Sale' sign. Ask yourself: Is this a surplus? Did the store simply make too many, or did people stop wanting to buy them at the old price?