Question

In a situation of excess supply, market price tends to _________.

• A. rise
• B. fall
• C. remain constant
• D. none of these

Answer 1

Answer: (B)

fall

In a situation of excess supply, market price tends to fall. Excess supply is a situation where the quantity demanded is less than the quantity supplied. In this situation the price reduces to cure the situation. When the price is reduced the customers demand more and supply is reduced and the situation is corrected.