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Question

At the given price of a commodity, there is excess supply. What changes will establish the equilibrium price? Explain with the help of a diagram.

Solution
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When there is excess supply in the market the prices of goods are too high and quantity demanded is less than quantity demanded. To cure the situation money supply should be increased by monetary and fiscal policies, and price of goods should be reduced to increase demand and bring the economy at equilibrium.

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At the given price of a commodity, there is excess supply. What changes will establish the equilibrium price? Explain with the help of a diagram.
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