In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplies will decrease until equilibrium is reached.

Question

Quizplus · Accepted Answer

This statement is true according to the law of supply and demand. When there is a surplus of a good, there is an excess supply that causes the market price to fall. As the price falls, the quantity demanded increases and the quantity supplied decreases, which eventually leads to a new equilibrium where the quantity demanded equals the quantity supplied.

In Response to a Surplus the Market Price of a Good