Industries, factories have to be profitable enough to maintain some level of production and pay high enough wages to attract and retain workers in relation to other employers.
So what he meant is that the price (not cost) of overproduced good decreases, as supply outweighs demand, making those factories unprofitable, so people don’t want to work in those factories producing that specific good (not all your factories)?
Do these people join other factories or do they become NEETs?
And why does the economy plummet? Does that happen assuming youre not producing anything else?
Is this under assumption of closed economy or open as well? I’d imagine international trade should make this effect less severe.