Question

Explain the concept of excess demand with the help of diagram.

Class XII
Forms of market & price determination

Answer 1

If the price is above the equilibrium then there is an excess supply of the product and if the price is below the equilibrium, then there is an excess demand.Any excess supply of a product will tend to force the price down towards the equilibrium, while any excess demand will tend to force the price up as shortages of the product emerge.