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.

BREAKING DOWN '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.

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