How is equilibrium reached if there is excess supply at a price higher than equilibrium price ?

How is equilibrium reached if there is excess supply at a price higher

1.	How is equilibrium reached if there is excess supply at a price higher than equilibrium price ?
Answer» Solution :Equilibrium price refers to the price at which market DEMAND is equal to market supply (i.e., there is no EXCESS supply). So, the price with excess supply is not an equilibrium price. In the DIAGRAM, at `OP_(1)` level of price, `M_(2)M_(1)` is the excess supply. When the market supply is greater than the market demand, the COMPETITION among sellers will bring price downwards. The quantity supplied tends to contract in response to the fall in price (law of supply) leading to movement (contraction) along supply curve SS, from point B to point E. At OP, quantity supplied contracts demand, leading to movement (extension) along demand curve DD, from point A to point E. THUS, the quantity demanded rises from `OM_(2)-OM`. The equilibrium is at point E, with OP as equilibrium price and OM as equilibrium quantity.