State two ways through which excess supply condition is created in the market.
Dear Student
Excess supply condition is a disequilibrium condition of the market when the quantity supplied is more than quantity demanded . This can arise in two situation :
a) When the price is set too high . When the price of a commodity is exorbitantly high then the suppliers would have an incentive to supply but the buyers won't be attracted to buy because of the price .
b) When due to some other factor the demand of a good suddenly falls . As for example , suppose too many people suddenly became health conscious and stopped consuming alcohol . Then this suddenly fall in demand will lead to a excess supply in the market .
Regards .
Excess supply condition is a disequilibrium condition of the market when the quantity supplied is more than quantity demanded . This can arise in two situation :
a) When the price is set too high . When the price of a commodity is exorbitantly high then the suppliers would have an incentive to supply but the buyers won't be attracted to buy because of the price .
b) When due to some other factor the demand of a good suddenly falls . As for example , suppose too many people suddenly became health conscious and stopped consuming alcohol . Then this suddenly fall in demand will lead to a excess supply in the market .
Regards .