Overproduction

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In economics, overproduction, oversupply, excess of supply or glut refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment.

The demand side equivalent is underconsumption; some consider supply and demand two sides to the same coin – excess supply is only relative to a given demand, and insufficient demand is only relative to a given supply – and thus consider overproduction and underconsumption equivalent.^[1]

In lean thinking, overproduction of goods or goods in process is seen as one of the seven wastes (Japanese term: muda) which do not add value to a product, and is considered "the most serious" of the seven.^[2]

Overproduction is often attributed to previous overinvestment – creation of excess productive capacity, which must then either lie idle (or under capacity), which is unprofitable, or produce an excess supply.