In the diagram below; there is an excess?

A. demand for 30 units
B. supply of 40 units
C. demand for 20 units
D. supply of 20 units

 
Correct Answer:

Option B – demand for 20 units

Explanation

Excess demand occurred when 40 units were supplied. This is because, at this point, the demand was the same as at when 20 units was supplied. Therefore supplying 40 units when the maximum demand by the market is 20, would lead to excess supply.