Answer:
When the market is in equilibrium, this implies that the market demand is equal to the market supply at the equilibrium point. Now, in case the market supply increases, this leads to a rightward shift in the market supply curve. This is because, an increase in supply refers to a rise in the supply of the given commodity due to change in factors other than price. Thus, in the given case the supply curve will shift towards right. As a result, there will exist a situation of" excess supply at the equilibrium point. This can be shown in the following diagram.
As the market supply increases, the initial supply shifts rightwards to the new supply curve \[{{S}_{2}}{{S}_{2}}\] from\[{{S}_{1}}{{S}_{1}}\]. Not at the initial market price of\[O{{P}_{1}}\], there exists excess supply. Due to the excess supply some of the existing firms are ready to sell the output at comparatively lower prices to increase their sale, therefore, the market price will tend to fall. The fall in the market price will continue until it reaches\[O{{P}_{2}}\]. The new market equilibrium will occur at point\[{{E}_{2}}\], where the new market supply curve intersects the initial demand curve. The total quantity supplied will be equal to the quantity demanded at \[O{{Q}_{2}}\] and the new equilibrium price will fall to\[O{{P}_{2}}\].
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