Consider a market consisting of two farms producing same quality of jowar. The market demand curve and the market supply curve for rice are given by:

q_D = 250 – p 

q_S = 150 + p 

At price of 125, there will be

Excess Supply

The correct answer is option 3: Excess Supply

Putting p = 125 in both equations of demand and supply.

Q_d= 250-p

=250-125

= 125.

Q_s = 150+p

= 150 + 125

= 275.

Since supply is greater than demand, there will be excess supply of 150 (275-125) at the price of 125.