Describe how a competitive market would react to excess supply.

In competitive market, there is no governement interference and a lot buyers and sellers, so the market can operate equilibrium. When there is excess supply, there are too many goods which are not purchased by the buyers. The sellers will then produce less and lower the price so that all goods are sold. The supply is contracted in other words. If the supply is contracted, it will reach the equilibrium in the market. This equilibrium shows price fall and increased output quantity. This equilibrium means allocative efficiency is achieved.

Answered by William L. Economics tutor

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