Question

why price decreases when supply excedes demand​

Answer 1

Price and demand are inversely related, while price and supply are directly related.

When supply of a commodity is excess in demand of a commodity, then price of the commodity decreases.

Suppose , the demand is 50 units and supply is 100 units, then there is an excess of supply over demand for a commodity. The supply is almost twice of the demand of the people.

In such a case, people will not buy more of a commodity at the same price.

Hence, if the firms want to sell their commodity, they will have to decrease the price of the commodity, which will motivate the people, to buy more of a commodity, even when they don't necessarily need it.

Hope this helps...

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