ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Excess Demand: the quantity demanded is greater than the quantity supplied at the given price. This is also called a shortage. Excess Supply: the quantity demanded is less than the quantity supplied at the given price. This is also called a surplus.

Detailed explanation-2: -A surplus exists if the quantity of a good or service supplied exceeds the quantity demanded at the current price; it causes downward pressure on price.

Detailed explanation-3: -The equilibrium occurs where the quantity demanded is equal to the quantity supplied. If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist.

Detailed explanation-4: -It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise. There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.

Detailed explanation-5: -Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded-that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.