A Comprehensive Overview: Excess Deficient Demand and Its Scope

Dr. Mounica Vallabhaneni

Abstract

The ideas of excess and deficient demand are fundamental to understanding aggregate demand dynamics and their consequences for the overall health of an economy. An overview of excess and deficient demand concepts, their significance, and their usefulness in economic analysis and policy formation are given in this chapter. Excess and deficient demand analysis aids in the identification of economic imbalances and the development of effective management strategies for them by policymakers, entrepreneurs, and economists. Excess demand arises when total demand exceeds the economy's ability to produce goods and services at the going rate, which creates inflationary pressures. A reduction in output and potential deflationary pressures emerge from sufficient demand, on the other hand, when total demand exceeds the economy's capacity to provide goods and services.