ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded-that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.

Detailed explanation-2: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.

Detailed explanation-3: -If demand decreases, producer surplus decreases. Shifts in the supply curve are directly related to producer surplus. If supply increases, producer surplus increases.