excess demand

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The difference between demand and supply. If the excess demand for a good is positive then the quantity of a good demanded exceeds the quantity supplied; if excess demand is negative the converse is true. An economy is in equilibrium if excess demand is absent. If there is excess demand price adjustment must take place for equilibrium to be achieved. Walras's law states that the total value of excess demand summed over all goods in the economy is zero. Sonnenschein's theorem shows that for any function satisfying Walras's law there is an economy for which it is the excess demand function.

Subjects: Economics.

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