Excess supply is created when price or _____ move away from the equilibrium point.

Question:- Excess supply is created when price or _____ move away from the equilibrium point.

Answer: The correct answer is “quantity.”

In a domestic market for example, point of equilibrium represents the balance between the total supply and total demand as indicated by the supply and demand curves respectively depicting the equilibrium price and quantity. I would like to highlight that this situation is accompanied by a market clearance, which means that the quantity supplied by producers coincides with the quantity demanded by consumers.

Where the determinants of demand and supply either push the price above the equilibrium price or the quantity above the equilibrium quantity, there is excess supply. These include a situation where a firm holds a stock of goods or is producing a certain quantity of service, which people are not willing or able to buy at the prevailing price. High supply means that the demand for boats is low and this results to a lower asking price because dealers do their best in order to offload their excess stock. On the other hand, if the price sits below the equilibrium price or the quantity supplied is less than the equilibrium quantity, an excess demand situation is prevailing.