Effects of Surplus

now let's see what happens in situations where the market price is not set at the equilibrium price. So it's not always gonna be an equilibrium, right? We're not perfect. Um There could be a situation where the price is set too high. Right? So if if the price is set above the equilibrium price we're gonna have what's called a surplus. And that surplus is when the quantity supplied, do it in red. The quantity supplied is greater than the quantity demanded. Right So think about what that means the quantity supplied being greater than the quantity demanded. That means that there was more being supplied than people wanted to buy. There's extra stuff here, there's what we call excess supply. Right? So let's look at this on a graph and let's see how this really works. So first thing let's go ahead and label our graph, we've got our price access here are quantity access here and which lines demand and which line is supply. We've got our demand downward double D. S. And then supply is just the other one. Cool. Alright so in this graph, just like in the video about equilibrium we have that equilibrium price here right where they cross is going to be six. But let's go ahead and say that the market price isn't six. The market price let's say is something higher than six. Like eight. I'm gonna put here P. H. For high price at eight. Cool. So our high prices eight let's see what the quantity demanded and the quantity supplied is at that price. So I'm gonna go ahead and go across to my demand line to see where I cross it and here is where I'm gonna cross my demand line Um at a price of eight. So let's see how much is the quantity demanded at this price? We're gonna go down, we're gonna be somewhere around here. Right, and we'll say uh this is the quantity demanded, I'm gonna put down there, I'm gonna put that in blue because our demand line is blue right here. So quantity demanded. And let's do the same thing, let's keep going. And at that price of eight let's find where we cross our supply curve. So we're gonna keep going here at that price of eight and here we are, this is where we're gonna pass the supply curve and let's find out what that quantity is over here. So we're gonna go down, we're gonna find a quantity supplied way up here. Right, so you can already see that the quantity demanded is less than the quantity supplied here. Right, we've got a lot more being supplied. I'm gonna put a little arrow in between here just to notice that there's a difference. Right? Um So what we have is this surplus and the surplus can be identified right here as this area. This Area right here, this is our surplus, right between the quantity demanded of about five units and the quantity supplied of 14 units. Cool. So let's try the same thing with a low price