Demand and supply

Question

What happens when demand is more than supply?

Answer

when demand is more than supply, then the price and value of the product both will rise. we will understand this with an example given below.
for example, a farmer grows tomatoes in a village, and he is the only supplier of tomatoes. now, every year the season cycle remains constant, and the crops grow perfectly and in huge quantity such that every family can easily get and eat tomatoes throughout the year. the price of tomatoes is 20 rs/kg and every year it remains the same as demand and supply go hand in hand.
  
now, there comes a year in monsoon season it rains the most in that village and the entire village is flooded including the tomatoes farm. all the tomato plants in the farm are uprooted and the whole crops got damaged. the quantity of people eating tomatoes daily is the same, but the farmer who grows tomatoes will now not be able to supply the whole village until the new crop is planted, taken care of properly and the new and healthy tomatoes grow in such a huge quantity.
  
so now, the stock which lasted with the farmer cannot satisfy the demand of whole village, also the money he invested in planting the previous crop is wasted and he needs more money to re-plant the crops. he currently doesn’t have sufficient amount of funds to buy new seeds, plant them, water them regularly, sprinkle the pesticides, plough the field etc.
  
all of these tasks need money and manpower, so to regain the pace of growth of tomatoes, farmer will sell the tomatoes at higher price which is either 30-40 rs/kg or even more than that. as all the villagers are affected with this situation, their purchase power will decrease and with the shortage and price hike, they will feel that they cannot afford tomatoes daily.
  
as a result, value of tomatoes will increase for them and instead of consuming daily, they will consume only twice or thrice a week.

Answer

when the quantity of a good that buyers want to purchase exceeds the quantity that producers are willing to sell at the current price, the market experiences a shortage, also called excess demand. this imbalance doesn't stay in place for long in a competitive market, because it sets off a predictable chain of adjustments that push the market back toward equilibrium.the first and most direct effect is upward pressure on price. because more people want the good than there is available, some buyers are willing to pay more to secure it, and sellers recognize they can raise prices without losing all their customers. as the price climbs, two things happen simultaneously: quantity demanded falls, because fewer buyers are willing or able to pay the higher price, and quantity supplied rises, because producers are motivated by better profit margins to bring more of the good to market. these two forces continue narrowing the gap until quantity demanded and quantity supplied meet at a new equilibrium price, at which point the shortage is eliminated.graphically, this is shown on a supply and demand diagram where the current price sits below equilibrium. at that price, the demand curve lies to the right of the supply curve, and the horizontal distance between them represents the size of the shortage. the market naturally moves along both curves toward the point where they intersect.not every market adjusts through price right away. when prices are fixed or slow to change, due to price ceilings, contracts, or social resistance to price hikes, the shortage persists longer and the market rations the good through non-price mechanisms instead, such as waiting lists, lottery systems, first-come-first-served lines, or purchase limits per customer. in more extreme cases, a black market can emerge, where the good is resold above its official price to buyers willing to pay for guaranteed access.real-world examples make this easier to picture: concert tickets that sell out and get resold at a premium, a new gaming console rationed through a launch-day lottery, or gasoline shortages during a supply disruption that lead to long lines and purchase limits. in each case the underlying cause is the same &mdash; quantity demanded outpacing quantity supplied at the prevailing price &mdash; and the market's response is what economists study as the process of reaching a new equilibrium.

Answer

this explains what happens when demand exceeds supply in a clear, concise waywhen demand is greater than supply, a shortage occurs. because more people want the product than is available, prices usually rise until supply increases or demand decreases. for example, if a new gaming console is released and stores only have 100 units but 500 people want to buy one, the consoles may sell out quickly and prices may increase.

Answer

if demand exceeds supply, consumers are forced to fight over the things that they want to purchase. to put it simply, when stores run out of stock, consumers have to wait for the products to come back in stock. sellers can set limits on the amount of items that an individual can purchase to prevent one customer from hoarding the stock. obviously, the price of the items themselves will go up when the demand for them is so high. this is because the high demand causes them to be rare–consumers fight over the same items, causing the items to be seen on the shelves less and less. to say it simply, if demand exceeds supply, it means that the supply is rare, and therefore more valuable. additionally, sellers may raise the prices because they want to take advantage of the high demand. the high demand means that customers may be desperate for the items, and will be willing to pay higher prices for them. when demand exceeds supply, there is another common outcome. third party sellers may try to take advantage of the high demand, by buying the sellers items and selling them on aftermarket sites such as facebook marketplace, ebay, or craigslist. however, as prices rise, whether that be from the original sellers or from third party sellers, buyers will slowly come to the realization that the item is not worth the price that it had been marked as a result of high demand. buyers are no longer interested in purchasing these items, which reduces the amount of stock that sellers need to have ready. the shortage of supply is ended by this walking away of buyers (who were walking away from the high priced items that had been high demand), and sellers producing even more products to sell at high prices. the market corrects itself, the shelves are healthily stocked, and prices have returned to their normal prices.

Answer

er price increases .market monopoly is a favor to the merchants.new producers may also enter the market.

Answer

when demand for a product or service is higher than its available supply, it creates a market condition known as a shortage or excess demand. here is a simple, step-by-step breakdown of exactly what happens in the market during this situation:•prices go up (inflation): since the item is rare and many people want it, buyers are often willing to pay more to get their hands on it. sellers naturally seize this opportunity and increase the prices to maximize profit.•competition among buyers: you will see long waiting lines, pre-orders, or out-of-stock notices. products disappear from the shelves quickly, and a "sellers' market" is created where the suppliers hold all the power.•production increases: high prices and huge demand serve as a green signal for businesses. to capture more profit, existing factories increase production, or new competitors enter the market to sell the same product.•market returns to equilibrium: eventually, as prices rise, some buyers drop out because the item becomes too expensive. at the same time, the increased production boosts the supply. this push and pull continues until supply and demand balance out again (reaching market equilibrium)a classic modern example of this is when a highly anticipated smartphone or sneaker drops&mdash;low supply and massive demand cause resell prices to skyrocket until the company produces enough stock for everyone!

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Demand and supply

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