Both excess supply and excess demand are a result of
equilibrium.
disequilibrium.
overproduction.
elasticity.

Both excess supply and excess demand are a result of disequilibrium. It is a condition where supply and demand don’t meet in the same rate or level which is called as equilibrium.  

EXPLANATION:  

Disequilibrium is a condition where the variables of price and quantity don’t meet the buyers’ and sellers’ expectations. It also can be said that equilibrium is a condition where price and production are naturally brought to the middle ground. Disequilibrium is also used to define a country’s balance of payments where there is a deficit or surplus. On the contrary, when the variables of price and quantity are in agreement with the buyers’ and sellers’ expectations, the condition is called equilibrium.  

Facts about disequilibrium:

•Disequilibrium will generally be resolved by the market as it enters into a new state of equilibrium.  

•Disequilibrium is triggered by several reasons such as government intervention to unilateral action by the distributor or supplier and labor market inefficiencies.  

•Disequilibrium is a condition when outside powers disrupt a market’s demand and supply. In result, the market goes in a state during which demand and supply are mismatched.  

•In many conditions, the main cause of disequilibrium is the deficiencies which are created either in the aggregate supply or aggregate demand side of the company.  

•There are two types of disequilibrium; a balance of payment and labor market. Balance payment disequilibrium is when there is a large current account deficit while labor market disequilibrium is at the time there is real wage unemployment.  

LEARN MORE:  

If you’re interested in learning more about this topic, we recommend you to also take a look at the following questions:

1.What are the pros of a mixed market economy for most citizens?  

2.Excess demand and excess supply

KEYWORDS: Both excess supply and excess demand are a result of, diseqilibrium, excess demand, excess supply

Subject: Business

Class: 10-12

Sub-chapter: Economic  

The option B is correct. Both excess supply and excess demand are a result of disequilibrium.  

Further Explanation:

Excess supply means the supply of the product rises, the producer produces more amount of goods. Excess demand means the demand for a particular product rises, the demand for a particular product is increased from the expected demand. The excess demand shifts the demand curve towards rightward.  

Justification for the correct and incorrect

A.

Equilibrium: This option is incorrect.  

Equilibrium is a point where the demand and supply of a particular good meet. The equilibrium price is the price where demand is equal to the supply of the goods. The excess demand and excess supply do not meet at the equilibrium level.  

B.

Disequilibrium: This option is correct.  

Disequilibrium is a point where the demand and supply of a particular good do not meet. The excess demand and excess supply do not meet at the equilibrium level, this is called disequilibrium. This is the correct option.   C.

Overproduction: This option is incorrect.

Overproduction refers to the stage of production where the supply of the goods exceeds the demand of the good. This is not correct.  

D.

Elasticity: This option is incorrect.

Elasticity means how much change in the price of the goods due to any factor. In this situation, demand and supply are given. This option is incorrect.

Learn more:

1.Learn more about demand and supply

2.Learn more about demand and type of goods

3.Learn more about goods production  

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Demand and supply

Keywords:

excess supply, excess demand, demand and supply, equilibrium, disequilibrium, overproduction,  producer, seller, rises, change in the price, particular goods.