Excess Supply or Surplus

An excess supply or surplus occurs when the price is above the equilibrium price, leading to the quantity supplied in the market being greater than the quantity demanded.

Excess Supply Graph

As shown in the graph, when the price is 60, the quantity supplied is 400, but the quantity demanded is 200. In this case, at the price of 60, the quantity that sellers want to sell is greater than the quantity that buyers are willing to buy. Consequently, sellers cannot sell all they want to. This is the situation where sellers have unsold inventory because the price is too high for consumers to pay for that good.

The difference between the quantity supplied and the quantity demanded is the excess supply in the market. In this case, it would be 400 - 200, meaning there is an excess supply of 200 units.