Surplus Resolved by Price Adjustment

Steps:

• Surplus occurs when quantity supplied exceeds quantity demanded at the current price.
• In a free market, this imbalance signals sellers to lower prices to attract buyers.
• Lower prices increase quantity demanded and decrease quantity supplied until they balance.
• Equilibrium is reached when quantity supplied equals quantity demanded.

Why B is correct:

• A fall in price follows the law of supply and demand, shifting the market toward equilibrium by reducing the surplus gap.

Why the others are wrong:

• A: Decreases demand, widening the surplus and moving further from equilibrium.
• C: Sets a price floor above equilibrium, sustaining or creating a surplus.
• D: Boosts supply, enlarging the surplus without addressing the imbalance.

Final answer: B