If there is a surplus in the market for fresh milk, what will happen?

If there is a surplus in the market for fresh milk, what will happen?

• A. Prices will rise.
• B. Demand will increase.
• C. Prices will fall until the market returns to equilibrium.
• D. Supply will decrease.

Answer: (C)

A surplus happens when there is more milk supplied than demanded at the current price. In that situation, the market pushes the price down to clear the excess. As the price falls, buyers want to buy more milk (demand rises) and producers are willing to sell less (supply falls), so the excess supply shrinks until quantity supplied equals quantity demanded. That’s why the price falls until the market returns to equilibrium. The other options don’t fit because rising prices would worsen the surplus, a rise in demand doesn’t directly fix the surplus on its own, and while lower prices do cause producers to supply less, the important mechanism resolving the surplus is the price decline toward equilibrium.

A surplus happens when there is more milk supplied than demanded at the current price. In that situation, the market pushes the price down to clear the excess. As the price falls, buyers want to buy more milk (demand rises) and producers are willing to sell less (supply falls), so the excess supply shrinks until quantity supplied equals quantity demanded. That’s why the price falls until the market returns to equilibrium. The other options don’t fit because rising prices would worsen the surplus, a rise in demand doesn’t directly fix the surplus on its own, and while lower prices do cause producers to supply less, the important mechanism resolving the surplus is the price decline toward equilibrium.