Question

What is meant by excess demand?

Hint:

Excess demand usually leads to an upward pressure on prices, as buyers compete for the limited goods, eventually pushing the market back toward equilibrium.

Answer 1

Step 1: Concept Overview:
Market equilibrium is achieved when Market Demand equals Market Supply. Excess demand arises when this balance is disturbed at a particular price level. \
Step 2: Technical Explanation:
Excess demand, or shortage, occurs when the quantity demanded of a good or service exceeds the quantity supplied at the current market price.
Step 3: Understanding the Condition:
This situation typically arises when the market price is set below the equilibrium price. At a lower price, sellers are unwilling to supply a large quantity, while consumers desire more of the good or service.
Step 4: Conclusion:
Excess demand occurs when the Quantity Demanded ($Q_d$) is greater than the Quantity Supplied ($Q_s$) at a specific price.