Question

What happens in the situation of excess demand and excess supply?

Answer 1

Heya....

* In case of excess demand....

It is the situation of below the equilibrium price....

In this consumer is exploited by the seller in terms of heavy charges...

For this govt fixes the price called price ceilings ...means the maximum prices that a producer can charge from buyer for its product...


* In the situation of excess supply...

In this situation there is excess supply above the equilibrium price...

In this producer is exploited due to less sale and large stocks...

For this govt set minimum price ..means price floor at which he buys the extra left output for buffer stocks...