Surplus
Candlefocus EditorInventory surpluses may occur when a business produces too much of a certain type of product, or a company overestimates customer demand for a good or service. As a result, unsold products remain in inventory and the business is unable to turn a profit from the item. The surplus can also be a result of a decrease in customer demand or changes in the market. The business may find itself unable to lower its stock of the surplus item due to restrictions in the production timetable or because of contractual commitments.
Budgetary surpluses occur when income earned exceeds expenses paid. This can lead to economic growth and improved living standards (assuming the money is used appropriately). A budget surplus can also have opposite effects, such as a decrease in the demand for labor, as it may suggest an economy is in an oversupply.
In economics, a surplus often refers to an imbalance between the supply and demand of a product or service. In a perfectly balanced market, prices would remain static and the price of an item would match the cost determined by the market. When the supply exceeds the demand, prices fall and a surplus is created. This phenomenon typically leads to a decrease in the profitability of a company and/or can cause prices of the inventory item to fall below the cost price.
Surplus is an important concept in economics because it reveals imbalances in the market, but also offers opportunities and benefits to those who can effectively manage the situation. For example, inventory surpluses can be addressed by offering discounts, promotions, or repurposing the items. Budgetary surpluses, on the other hand, can create an environment of economic growth with the right methods of distribution.