Before we delve deeper into the details of supply and demand disequilibrium, it’s necessary to clarify what the market disequilibrium actually is. What we are discussing is the market state that occurs when the supply and demand opposing market forces achieve the balances and there’s an evident tendency for the further change. In other words, market disequilibrium is a direct result of state when the market isn’t well-balanced. To be clearer, market disequilibrium is the result of the market situation, when the supply price isn’t equal to that of the demand and the quality level that is supplied isn’t equal to the quality that is demanded.
Generally, supply and demand disequilibrium happens when there’s an imbalance of the opposing forces. When it comes down to the market disequilibrium, the imbalanced opposing forces are supply and demand. Once these two forces are out of balance, a surplus or a shortage occurs, which brings on the price changes. Both – a shortage or a surplus – exist because of the inequality between the quantity that is supplied and the quantity that is demanded.
To speak of a shortage, it usually occurs when the quantity that is demanded at the moment exceeds the supplied quantity. The state described before exists in case the market price is lower than the equilibrium one. In such case, buyers have no opportunity to buy the sufficient amount of goods at the currently set price. Some consumers will definitely find the increase of the price too hard to bear. This, in turn, will make them no longer demand a particular service or product. In the meantime, the increased quantity of available service or product will be pretty satisfying for the other buyers. In the long run, the desired equilibrium will be successfully reached.
As for the surplus matter, it comes about when the supplied quantity exceeds the quantity that is currently demanded at a particular price. This condition occurs within the market if its price is above the equilibrium price. The situation is that the sellers are deprived of the opportunity to sell the desired amount of products at the current price. That is why they tend to lower the price. In response to the lower price, the buyers tend to increase the quantity demanded, which moves the market toward the quantity and price equilibrium. If this happens, excessive supply lies heavy on the downward pressure on the product price.
Market disequilibrium emerges with a shortage or a surplus for the reason that the price always changes. The very inequality between the quantity supplied and the demanded quantity incites the price changes. A shortage causes the price rise, while a surplus causes the drop of prices.
It is worth considering that shortage and surplus in supply usually have an extensive impact on the specific service or good price, as well as the overall quantity eventually sold. Various moves in the supply availability cause disequilibrium between the demands and supply levels that prevail nowadays.