When the demand for a product or service is greater than the supply at the current market price, this results in what is called excess demand or a shortage. The following happens:

• Prices tend to rise because buyers compete to secure the limited available quantity. This price increase continues until a new market equilibrium is reached where quantity demanded equals quantity supplied.
• The shortage means not all consumers can buy the product at the current price, potentially causing inefficiencies like queuing or alternative means of competition.
• Higher prices encourage suppliers to increase production and may attract new suppliers into the market, increasing supply.
• Eventually, the market reaches a new equilibrium with a higher price and quantity supplied, balancing demand and supply.
• If excess demand persists, it may indicate market inefficiencies or barriers to increasing supply, sometimes requiring government intervention to restore balance.

In summary, an excess demand leads to price increases, shortages, incentives for more supply, and a movement toward equilibrium.