When do we say there is excess demand for a commodity in the market?
We say there is excess demand in the market when the market demand exceeds the market supply at a given price. This situation typically arises when the prevailing market price is lower than the equilibrium price.
Algebraically, this is expressed as , where is the quantity demanded and is the quantity supplied. In this state, the quantity that consumers wish to buy is greater than the quantity that firms wish to sell, resulting in a positive excess demand ().
Explanation
The textbook explicitly defines excess demand as a situation where market demand exceeds market supply at a specific price. The provided context illustrates this with examples showing that when price falls below the equilibrium price (e.g., price being less than equilibrium ), the quantity demanded () becomes greater than the quantity supplied (). This mismatch creates excess demand, calculated algebraically as .