When do we say there is excess supply for a commodity in the market?

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Solution

It can be said that there is an excess supply of a commodity in the market when the supply of a commodity exceeds the demand for that commodity at a particular price.

Also read:

Long Run Supply Curve of a Firm

Short Run Supply Curve of a Firm

Price Elasticity of Supply

Determinants of a Firms Supply Curve

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When do we say that there is an excess supply for a commodity in the market?

When do we say that there is an excess demand for a commodity in the market?

Suppose the demand and supply curve of commodity X in a perfectly competitive market are given by:

q^D = 700 − p

q^S = 500 + 3p for p ≥ 15

= 0 for 0 ≤ p <15

Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?

When do we say that there is an excess demand for a commodity in the market?

Q.
When there is no excess demand or excess supply in the market, everybody is equally satisfied (or nobody suffers any shortage).

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