Excess Demand

Bigger! More is better!

It’s the Capitalist way, right?

Excess demand happens when we want more, but there’s not enough supply to go around. When supply meets demand, it means that the amount of stuff that’s produced is the same amount of stuff that’s bought. Excess demand, on the other hand, is a wild beast.

You can look at excess demand two ways. First, you could say firms aren’t supplying enough of their stuff. The people want more, so they should make more, before there are riots in the store. The other way you could look at it is not from the quantity perspective, but from the price perspective. If the firm raised the price of the good enough, that excess demand would disappear. Some people will stop demanding the good once it becomes too high of a price for them to justify.

And justify they will.