Microeconomics

In the 80’s cabbage patches kid dolls was the holiday toy that was popular. There was so many different cabbage patches kid dolls that everybody thought they was bound to get one. People all over the world was buying cabbage patch kids. The demand for cabbage became a problem for the suppliers. The supply had produced 5 million cabbage patch kids to sell each week but there were over 10 million people that want the cabbage patch kids a week. The cabbage patches kid range from 49.00 to $100.00. In a matter of a week this dolls was so popular that demand became overwhelmed for the supplier to supply immediately. The supplier had to hire more employees to supply the consumers need.

Since there is a shortage on the dolls the producer had to increase the price and move it toward the equilibrium price. After all the demand was met for the holiday sales the prices were decreased. The producer cannot force people to buy their intended amount to sell so some are forced to reduce the price. In addition some producers are forced to cut production. As producers cut prices, the price falls towards its equilibrium. The falling price reduces the amount of extra dolls or the surplus because