What is excess demand and excess supply?

What is excess demand and excess supply?

You can check the answer of the people under the question at Quora “in the event of excess demand in the coffee market

0 thoughts on “What is excess demand and excess supply?”

  1. Hi,
    Excess supply is a situation where goods or services have flooded the market but the takers are not there enough for them. This leads to a lot of inventory in the goods produced. Thus there is usually a price cut observed in such situations.
    Excess demand on the other hand is vice versa. There is immense demand in the market by the consumers but the quantity of products is not there to meet the needs. So, the price of the good keeps going up, as in a free market without any encumbrances on price ceiling, the one who pays more gets entitled to the product. Here there will be almost zero inventory.
    Hope this helps!

  2. Here is a simple graphic I put together that will show you the difference. With excess supply, sellers are willing to supply more at the higher price but consumers are only willing to buy less. So Qs > Qd.
    But with excess demand, it’s the reverse. Co…

  3. Excess demams is a situations in which the demamd is more than supply. For eg. Demand is 100kgs of apples but suppy is only 80 kgs. It will leads to increase the price. That 20 kgs apples is extra demand..
    Excess supply is a situation in which the supply is more then demand. For eg. Demand is 80kgs of apples but the supply is 100kgs. It will reduce the price. That 20 kgs extara apples are extra supply

  4. Its a very simple concept. Lets talk about my deo.
    If we want more cans of deo and the company is unable to produce as much as we want then this is a case of excess demand.
    Now in excess supply, the company is producing large quantities of deo but there are very few customers. This is called excess supply where quantity is large and customers are few.
    Excess demand results in higher prices because there are more people to buy a single product.
    Excess supply caused fall on prices because company wants to empty thrir stock and so they give discounts. Reebok sale at 30–40% prices is a good example.

  5. Excess demand occurs at a price below the equilibrium price where quantity demanded exceeds quantity supplied.
    Excess supply occurs at a price above the equilibrium price where quantity supplied exceeds quantity demanded.

  6. Market clearing efficiency is when whatever is produced is demanded. This is market clearing economy.
    On the other hand if, whatever is produced is not demanded, then we say there is excess supply. Also, when there more demand for all produced, then we say, there is excess demand.
    To have an efficient economy there should be a market clearing economy of no excess demand or excess supply.

  7. If it is analyzed in a partial way or as it is said in economy to indicate that the other variables are constant or do not change “Seteris Paribus”. The excess demand leads to the increase of the market prices of a product. On the contrary an excess in the supply causes a decrease in the market price of a product.
    I hope I have helped you

  8. Excess supply means there are not enough consumers. People cannot afford it for its price.
    We have excess phones(or any item) , only most people cannot afford it.
    There is no excess demand, it is just a fad.

    Victor Allen’s

  9. When at the current price level, the quantity demanded is more than quantity supplied, a situation of excess demand is said to arise in the market. Excess demand occurs at a price less than the equilibrium price.
    Similarly, Excess supply is a market condition when the quantity supplied is greater than the quantity demanded. It occurs at a price greater than the equilibrium price level.

    Eight O’Clock

  10. The best example of this I can think of is food. Estimates have up to 40 percent of food in US goes into the trash while people abroad starve and even here in US people go hungry. With corn, sugar and meat subsidized there is excess supply but fruit and vegetables are not so they cost more.

  11. If the market price is greater than the equilibrium price then it creates an excess supply of goods. The market price is lower than the equilibrium price then it creates an excess demand or shortage of goods


  12. Excess supply is the situation where the price is above its equilibrium price. The quantity willing supplied by the producers is higher than the quantity demanded by the consumers.
    Excess demand is the situation where the price is below its equilibrium price. The quantity supplied is lower than the quantity demanded by the consumers.
    The following chart illustrates the excess demand and excess supply.

    What is excess demand and excess supply?

    In each of these situations market forces will interact to drive the prices to its equilibrium level.
    When we have higher prices and excess supply, manufacturers will have excess inventories and the competition among manufacturers will put the downward pressure on price as there will be some suppliers who will be willing to supply at lower prices. As prices fall, the consumer demand will increase until it finally settles at the equilibrium price.
    When we have lower prices and excess demand, there will shortage of goods, putting an upward pressure on the price as there will be more buyers chasing the available goods. As price increases the suppliers will start producing more but the demand from buyers will decrease. This will drive the price and quantity to its equilibrium level.

  13. It’s pretty simple.
    Excess demand occurs when aggregate demand is greater than aggregate supply. This means, consumers are demanding more than what the producers can produce and supply.
    Some reasons are-
    Rise in MPC- That is the ability of people to buy goods increases. This leads to excess demand in the economy.
    Reduction in taxes.
    Rise in exports-Due to currency depreciation of another country, the demand for goods from that country increases and this may lead to excess demand.
    Fall in imports -can lead to excess demand for the domestic economy
    Excess supply is basically the opposite.
    Hope this helps.
    Look for diagrams on these. You will be able to understand better.
    Good luck.

  14. Well, to understand it,let me give a natured example which we all face or might face in our life.
    If you have excess lunch/dinner over the demand for your stomach, it creates acidity and other stomach problems.
    If you don’t give proper food to your stomach when it is in need,it also affects the appetite. Both are bad for the health.
    Similarly excess demand is the need for a product over and above the products produced for marketing (sale).
    An excess supply is the situation where there is no need for the product but,there are products in the market for sale(to be marketed) which becomes dead stock (like Non Performing Assets ) in banking terms.
    The excess demand may occur when the product is good in terms of everything like quality, rate , quantity, advertisements to the product ,the company or brand which is producing the product and timing of the product positioned and launched in the market. Redmi mobile is one of the examples for excess demand.
    Excess supply on the other hand mainly occur if it doesn’t possess the attribute I.e timing of marketing the product.
    There are other reasons like failure in quality and other marketing tools like analysing the need and demand in the market and targeting wrong market which makes a product dead stock. But there are exceptions for some of the products to which the above reasons don’t fetch correct explanation for excess demand or supply .
    The important point to be noted here is “Timing” which acts as an important tool .
    Time is the lifeline in ones lifetime which if once lost ,it is lost forever. So lead the journey of life with the time.
    Time is one of the strongest tool which makes you both happy,fortune and feel regret. Choose your path carefully .Life is a long journey and even short to lead successful life ahead..
    Have a great life ahead. Enjoy learning .

  15. Supply means total amount of a good or service is available to consumers.
    Demand is the amount consumers want.
    Excess supply or excess demand means difference between the amount demanded and supplied. If supplied amount exceeds demanded amount i.e excess supply. Similarly, if demanded amount exceeds supplied amount i.e excess demand.

    What is excess demand and excess supply?

    Source: http://http://wallstreetexaminer.com/wp-content/uploads/2015/07/wosd .png
    In the above figure, when supply curve is above the demand curve, we had excess supply of oil.
    Hope, it helps.

  16. whom it benefits would be dependent on what side you’re on; but from a vendor point of view excess demand is good. Excess demand allows you to raise prices and increase your revenue. This is because you’re selling all you can make and charging whatever you want. The opposite is excess supply where you can’t sell your wares because nobody wants them. You end up dropping prices below you cost of manufacturing to get rid of inventory.
    From a consumer point of view when vendors have too much inventory you get the really good bargains with excess supply. But with excess demand you cannot get the goods you want at a reasonable price, because everybody wants it. Think iPods when they first came out.

  17. Assume India is producing 1 million tons of coffee and tea powders for domestic co sumption and for exports..
    Due to global recession India’s export plunged and now the demand is only for 0.8 million tons and 0.2 million ton is now excess supply
    Due to bad weather coffee production reduced drastically and price of which …

  18. Excess demand is increase in demand by the consumers which crosses a permissible limit.
    Excess supply is increase in supply by the producers in the economy, thereby resulting in increase in unsold stock.

  19. It is a tool for abuse. For example, someone used “excess demand” to prove the Marshall-Lerner condition. When it is a straight-line, there is an elastic part and an inelastic part. The elastic (inelastic) part has a property of lowering price for more (less) revenue. The disproof is easy: Such “excess demand” line should cut the “zero quantity” axis, and the so-called elastic part actually means trade surplus. Then, any lowering of price will result in less surplus!
    Ref.: Choi, H. (2013). Welker’s Excess-Demand Marshall-Lerner Condition .

  20. They cannot exist at the same time.
    Beanie Babies were once in excess demand. People would wait at stores for deliveries, and then buy up everything. Beanie Baby prices on the aftermarket were often multiples or hundreds of times the retail price.
    Then Ty stopped production temporarily. The bottom fell out of the Beanie Baby market, and a prized doll previously worth $800 on …

  21. The word ‘Excess’ can be defined as “more than what is required”. When any product is available in plenty, the demand for it also increases. This is done with the thought that it might not be available in plenty, in future.


  22. Reply
  23. Excess demand occurs when price is below equilibrium. It could equally be called (but never is) “not enough supply”. Excess supply occurs when price is above equilibrium. It could equally be called (but never is) “not enough demand”. Demand and supply are only equal at equilibrium.



Leave a Comment