Excess supply occurs when the quantity of a good or service supplied exceeds the quantity demanded at the current price, often leading to downward pressure on prices. This imbalance can result from factors such as overproduction, decreased consumer demand, or price floors set above equilibrium price levels.

Excess Supply

Excess supply

quantity of a good

service supplied

quantity demanded

current price

downward pressure on prices

Imbalance means something is not even or fair, like when one side of a seesaw is heavier than the other. It can happen in many things, like when one person has more toys than another, or when there is more rain than sunshine in a week.

imbalance

overproduction

decreased consumer demand

Price floors are minimum price limits established by government regulations to guarantee producers receive a fair price for their goods or services. While intended to protect producers, they can lead to surplus supply when the imposed floor is above the equilibrium market price, causing inefficiencies.

price floors

equilibrium price levels

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