Surplus Adjustment in Markets

Steps:

• Price above equilibrium creates surplus (quantity supplied > quantity demanded).
• Market adjusts by price falling to reduce surplus.
• Falling price increases quantity demanded (law of demand).
• Falling price decreases quantity supplied (law of supply).

Why C is correct:

• Law of demand and supply: price fall from surplus raises quantity demanded and lowers quantity supplied, narrowing the gap toward equilibrium.

Why the others are wrong:

• A: Both falling suggests price rise, increasing surplus and moving away from equilibrium.
• B: Demand fall and supply rise widens surplus, diverging from equilibrium.
• D: Both rising implies price rise, expanding surplus further from equilibrium.

Final answer: C