Excess demand

An excess demand ( english demand surplus ) is in the business before, when on a market the demand , the supply exceeds. The opposite is the excess supply .

General

Functioning markets tend to balance supply and demand at the market price or equilibrium price ; there is market equilibrium . By contrast, excess demand is an indication of market imbalances. If the consumers increase their demand for a given supply of goods or services - for whatever reason - this creates a demand overhang: ${\displaystyle D}$ ${\displaystyle S}$

${\displaystyle S<D}$.

Due to the scarcity of supply, the great demand has to be repaired. The price mechanism ensures price increases, with which some buyers withdraw. This excess demand gives the providers a reason to increase prices and / or increase their capacities . As a result of these adjustments , the excess demand disappears after some time and the market equilibrates.

Causes and consequences

Excess demand is characteristic of sellers' markets , in which the suppliers have greater bargaining power . A demand overhang can develop above all if the competition on the supply side is very small and the demand has not yet reached market saturation . The main cause is usually underemployment among providers. The excess demand occurs below the equilibrium price. It tends to lead to rising prices, there is an inflationary effect. On non-functioning markets, the state will regulate by interventionism intervene, as in the foreign exchange market through foreign exchange intervention . The state tends to set maximum prices when there is excess demand . An example is the German housing market , which is characterized by a shortage of housing. The consequence is rent increases, so that the state intervenes with rent fixings. An excess of demand always comes from the demanders.

Demarcation

In terms of model theory, the excess demand and the supply gap are the same, but the difference between the two lies in the cause of the difference and in the effects on price and quantity changes. For example, a decrease in the effect investment inclination at a given lending rate an oversupply on the credit market , the demand for a gap in the capital goods market equivalent. In the case of excess demand, both price and quantity increase, while in the case of a supply gap, the price decreases but the amount increases.

Individual evidence

1. ↑ Walter Kortmann, Microeconomics: Application-related Basics , 2006, p. 302, FN 1
2. ↑ Walter Kortmann, Microeconomics: Application-related Basics , 2006, p. 409
3. ↑ Lothar Wildmann, Introduction to Economics, Microeconomics and Competition Policy , Volume I, 2007, p. 55
4. ↑ Lothar Wildmann, Introduction to Economics, Microeconomics and Competition Policy , Volume I, 2007, p. 55 f.