Question

Difference between excess demand and excess supply

Answer 1

Based on the demand and supply curve, the market forces drive the price to its equilibrium level.
There are two possibilities: 1) Excess Demand or 2) Excess Supply
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.

Answer 2

• When the demand of a product is more than its supply this situation is known as excess in demand.  
• This causes a rise in the price of the product.
• There are various causes for the excess in demand, namely rise in propensity to consume, increase in the income level of the consumer, reduction in taxes or increase in investment.
• When the supply of a product is more than of its demand this situation is called excess in supply.  
• This causes a decrease in the price of the product.
• The causes for increase in supply are the  growth of supply higher than the growth in  demand. Decrease in the price of raw materials or when  the demand is going down as the consumers switch to a different product.