EXCESS SUPPLY: A disequilibrium condition in a competitive market in which the quantity supplied is greater than the quantity demanded. Excess supply is another way to say surplus. It also goes by the common term of buyers' market. Excess supply is one of two disequilibrium states of the market. The other is excess demand (or shortage).Excess supply emerges in a market when the quantity supplied by the sellers exceeds the quantity demanded by the buyers... at a given market price. Sellers are seeking to sell more of the good than buyers are willing to buy, hence there is an "extra" or "excess" amount of supply.
The excess supply for 8-track tapes is indicated as the difference between the quantity supplied and the quantity demanded at a specific market price. In particular, at a 70-cent price, the quantity supplied is 600 tapes and the quantity demanded is 200 tapes. Sellers are willing and able to sell 400 tapes more than buyers are willing and able to buy. Hence this market has an excess supply of 400 tapes. The result of this excess supply is a decrease in the market price. Because sellers are unable to sell as much of the good as they want, they are inclined to bid down the price. Of course, as the price falls, the quantity demanded increases and the quantity supplied decreases, both acting to reduce the amount of the excess supply. Ultimately the entire excess supply is eliminated and equilibrium is restored. Check Out These Related Terms... | surplus | buyers' market | excess demand | shortage | sellers' market | market disequilibrium | disequilibrium price | Or For A Little Background... | market | equilibrium | market equilibrium | equilibrium price | equilibrium quantity | law of supply | law of demand | market clearing | voluntary exchange | And For Further Study... | market equilibrium, numerical analysis | market equilibrium, graphical analysis | competitive market | self correction, market | competitive market | invisible hand | free enterprise | Recommended Citation: EXCESS SUPPLY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: June 17, 2024]. |
