Oversupply

AAA

DEFINITION of 'Oversupply'

An excessive amount of a good or other substance. Oversupply results when demand is lower than supply, thus resulting in a surplus.

INVESTOPEDIA EXPLAINS 'Oversupply'

There are many reasons why oversupply may occur. If there is demand for a specific product that meets a certain need, then that product might become oversupplied if a new and improved product is introduced that makes the older product obsolete. Oversupply can also occur in situations where the price of the good or service is too high, or above equilibrium.

RELATED TERMS
  1. Elastic

    A situation in which the supply and demand for a good or service ...
  2. Equilibrium

    The state in which market supply and demand balance each other ...
  3. Demand

    An economic principle that describes a consumer's desire and ...
  4. Substitute

    A product or service that satisfies the need of a consumer that ...
  5. Supply

    A fundamental economic concept that describes the total amount ...
  6. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
RELATED FAQS
  1. How important are fleet sales to an automaker's business?

    Fleet sales have been turning much more profitable with the recovery of the auto industry since the financial crisis of 2 ... Read Full Answer >>
  2. How are negative correlations used in risk management?

    Negative correlation is a statistical measure used to describe a relationship between two variables. When two variables are ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What bond indexes follow the supply and demand for junk bonds?

    Bond indexes that track junk bonds include the Merrill Lynch High Yield Master II Index and the S&P U.S. High Yield Corporate ... Read Full Answer >>
  6. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Markets

    Cleaning Up Dirty Surplus Items On The Income Statement

    Dirty surplus items can skew net income. Knowing how to account for them will give you a cleaner picture.
  3. Economics

    In Praise Of Trade Deficits

    When a country imports more than it exports, is it a recipe for disaster or just part of a larger cycle?
  4. Economics

    Understanding the Product Life Cycle

    Product life cycle is the period of time during which a product is conceived and developed, brought to market and eventually removed from the market.
  5. Economics

    What are Barriers to Entry?

    A barrier to entry is any obstacle that restricts or impedes a company’s efforts to enter an industry.
  6. Economics

    Explaining Aggregate Supply

    Aggregate supply is the total supply of goods and services an economy produces in a given time period.
  7. Stock Analysis

    Smartphone "Flagship Killers" Coming after Apple and Samsung

    Learn why flagship killers such as OnePlus and Xiaomi have the potential to become the first legitimate competition faced by Apple and Samsung.
  8. Forex Strategies

    Three Currencies Benefiting From Low Oil Prices

    The Indian rupee is clearly the biggest beneficiary of the slide in oil prices, followed by the Indonesian rupiah and British pound.
  9. Economics

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  10. Economics

    What Is a Giffen Good?

    A Giffen good is a product whose demand increases as its price increases, and falls when its price falls.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!