When does a market experience disequilibrium?

A market experiences disequilibrium when the quantity supplied does not equal the quantity demanded. This can occur in two scenarios: excess supply and excess demand.

Excess supply happens when producers create more goods than consumers are willing or able to buy at a given price. This situation creates a surplus, leading to downward pressure on prices as suppliers seek to sell off their excess inventory.

On the other hand, excess demand arises when consumers want to purchase more goods than are available at a particular price. This scenario creates a shortage, leading to upward pressure on prices as consumers compete to secure the limited available goods.

Both excess supply and excess demand indicate that the market is not in a state of equilibrium, where ideally the quantity supplied matches the quantity demanded. Thus, the presence of either condition signifies a disequilibrium in the market.