The price of salsa rises. How does the increase in the price of salsa affect the supply of salsa? A) The supply of salsa decreases. There is no change to the supply of salsa, but the quantity of salsa supplied B) increases. There is no change to either the supply of salsa or the quantity of salsa C) supplied. D) There is no change to the supply of salsa, but the quantity of salsa supplied decreases. E) The supply of salsa increases.

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Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.