What happens to equilibrium price when there is a surplus in the market?

When there is a surplus in the market, it indicates that the quantity of a good or service supplied exceeds the quantity demanded at the current price. In economic terms, this imbalance leads to downward pressure on the equilibrium price.

Sellers will recognize that they have more product available than consumers are willing to buy at that higher price. To encourage sales and reduce the surplus, suppliers are likely to lower prices. As the price decreases, it makes the good or service more attractive to consumers, thereby increasing the quantity demanded and helping to restore equilibrium in the market.

The interaction of supply and demand in response to the surplus illustrates why the equilibrium price tends to decrease. When fewer items are sold at a higher price, reducing the price can stimulate demand, aligning supply and demand more closely. Thus, the equilibrium price decreases as a natural response to the surplus present in the market.