Impact of Excess Demand

Effect on Output

It does not affect output

As economy is already working at full capacity

There is no idle capacity in economy


Effect on Employment

it does not effect employment

It is because economy is already operating at full employment level


Effect on General price Level

It leads to increases in prices of commodity

This is because of Inflationary gap

(as price of commodity is more than supply)

Impact of Excess Demand - Teachoo.JPG

NCERT Questions

No questions in this part

Other Books

Question 1

What is the Impact of excess demand on output, employment and prices?

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Impact of Excess Demand Effect on Output Effect on Employment Effect on General price Level No Effect (No idle capacity) No Effect (Already full Employment) Increase in Prices (Due to Inflationary gap)

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Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years and a teacher from the past 18 years. He teaches Science, Economics, Accounting and English at Teachoo