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What is Excess Supply and Excess Demand?: Introduction Video Lecture | Economics Class 11 - Commerce

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FAQs on What is Excess Supply and Excess Demand?: Introduction Video Lecture - Economics Class 11 - Commerce

1. What is excess supply and excess demand?
Ans. Excess supply refers to a situation in the market where the quantity of a good or service supplied by producers exceeds the quantity demanded by consumers at a given price level. On the other hand, excess demand occurs when the quantity demanded by consumers exceeds the quantity supplied by producers at a given price level.
2. What are the causes of excess supply and excess demand?
Ans. Excess supply can be caused by factors such as overproduction, decrease in consumer demand, or an increase in the price of the product. Excess demand, on the other hand, can be caused by factors such as increased consumer demand, shortage of supply, or a decrease in the price of the product.
3. How do excess supply and excess demand affect the market?
Ans. Excess supply leads to a surplus in the market, which puts downward pressure on prices. Producers may be forced to lower prices or reduce production to match the lower demand. In contrast, excess demand creates a shortage in the market, leading to higher prices. Producers may increase prices or increase production to meet the higher demand.
4. How does the government intervene in cases of excess supply and excess demand?
Ans. The government can intervene in cases of excess supply by implementing policies such as price controls, subsidies, or export promotion to increase demand or reduce supply. In the case of excess demand, the government can intervene by implementing policies such as price controls, import restrictions, or increasing supply through subsidies or production incentives.
5. What are the impacts of excess supply and excess demand on the economy?
Ans. Excess supply and excess demand can have significant impacts on the economy. Excess supply can lead to decreased profits for producers, layoffs, and reduced economic growth. Excess demand can lead to inflation, higher prices, and income inequality. Both situations can disrupt market equilibrium and result in economic inefficiencies.
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