A Level Economics AQA Practice Exam

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What does the concept of surplus refer to?

  1. A situation where quantity demanded exceeds quantity supplied

  2. A situation where quantity supplied is greater than quantity demanded

  3. The equilibrium state of supply and demand

  4. The optimal price for consumers and producers

The correct answer is: A situation where quantity supplied is greater than quantity demanded

The concept of surplus refers to a situation where quantity supplied is greater than quantity demanded. This occurs when producers are willing to sell more of a good or service at a certain price than consumers are willing to buy. In this scenario, there is excess supply in the market, leading to an inability for sellers to sell all their goods at that price. In order to address this surplus, producers may lower prices to stimulate demand or reduce production levels. This situation contrasts with equilibrium, where the amount supplied matches the amount demanded. Other definitions, such as those suggesting a lack of demand or a balance between supply and demand, do not accurately capture the essence of a surplus, making the correct understanding essential in economics.

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