Excess Demand: the quantity demanded is greater than the quantity supplied at the given price. This is also called a shortage. Excess Supply: the quantity demanded is less than the quantity supplied at the given price. This is also called a surplus.
A basic tenet of economics is that when there is more supply than demand for an item or service, prices decline. Prices typically increase when demand outpaces supply. When demand is constant, there is an inverse relationship between supply and prices of products and services.
The only price at which consumer and producer plans coincide is the equilibrium price, which is reached when the quantity sought by consumers and the quantity supplied by producers, respectively, are equal. The equilibrium quantity is the name given to this common quantity.
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