MICROECONOMICS CH : 13 MARKET EQUILIBRIUM UNDER PERFECT COMPETITION AND EFFECTS OF SHIFTS IN DEMAND AND SUPPLY — Economics STD 11 Commerce — Question

Yes. Under perfect competition, situations of excess demand or excess supply are automatically corrected through the free play of market forces, called price mechanism.
When there is excess supply:
-Market price decreases.
-Decrease in market price leads to extension of demand and contraction of supply.
-The process of extension and contraction continues till excess supply is eliminated.
-New equilibrium is established with lower price and higher quantity than before.
When there is excess demand:
-Market price increases.
-Increase in market price causes contraction of demand and extension of supply.
-The process of extension and contraction continues till excess demand is eliminated.
-New equilibrium is established with higher price and higher quantity than before.