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Understanding Excess Supply and Unemployment Solutions

An excess supply occurs when the quantity supplied of a good exceeds the quantity demanded, leading producers to lower prices to increase demand. With a market surplus, some producers will be unable to sell all of their goods. In response, firms will lower their prices to remain competitive, bringing down market prices overall. As consumer prices drop, demand for the good rises, moving the market towards an equilibrium of equal supply and demand at a lower price point. Thus, excess supply puts downward pressure on prices.

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Mr Chaitanya Valiveti IPE
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13 views1 page

Understanding Excess Supply and Unemployment Solutions

An excess supply occurs when the quantity supplied of a good exceeds the quantity demanded, leading producers to lower prices to increase demand. With a market surplus, some producers will be unable to sell all of their goods. In response, firms will lower their prices to remain competitive, bringing down market prices overall. As consumer prices drop, demand for the good rises, moving the market towards an equilibrium of equal supply and demand at a lower price point. Thus, excess supply puts downward pressure on prices.

Uploaded by

Mr Chaitanya Valiveti IPE
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

EXCESS SUPPLY

Sometimes the market is not in equilibrium-that is quantity supplied doesn't equal quantity demanded.  When this
occurs there is either excess supply or excess demand.

A Market Surplus occurs when there is excess supply- that is quantity supplied is greater than quantity
demanded.  In this situation, some producers won't be able to sell all their goods. 
This will induce them
to lower their price to make their product more appealing.  In order to stay
competitive many firms will lower their prices thus lowering the market price
for the product.  In response to the lower price, consumers will increase their
quantity demanded, moving the market toward an equilibrium price and
quantity.  In this situation, excess supply has exerted downward pressure on
the price of the product.

UNEMPLOYMENT –SOLUTION

 Change in industrial technique:


 Policy regarding seasonal unemployment:
 To remove it:
o Agriculture should have multiple cropping,
o Plantations, horticulture, dairying and animal husbandry
should be encouraged,
o Cottage industries should be encouraged.
 Change in education system:
 Expansion of Employment exchanges:
 More assistance to self employed people:
 Full and more productive employment:
 Increase in Production:
 More importance to employment programmes:
 High rate of capital formation:
 Industries in co-operative sector:
 Decentralisation of industrial activity:
 Population control

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