Question

Distinguish between "Excess Demand" and "Deficient Demand".

Answer 1

Excess Demand. Excess demand refers to the situation when aggregate demand (AD) is more than the aggregate supply (AS) corresponding to full employment level of output in the economy. It gives rise to inflationary gap. It is gap by which actual aggregate demand exceeds the aggregate demand.r

On the other hand, excess demand is a situation, which occurs due to the excess of aggregate demand for output over the supply of output at the level of full employment. ... But excess demand leads only to an increase in the price level. Between the two – excess demand and deficient demand, the letter is worse.

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