Final answer:
In a market with an excess supply and upward sloping supply and downward sloping demand curves, prices will fall to reach the point of equilibrium where the quantity demanded equals the quantity supplied.
Step-by-step explanation:
When dealing with a market characterized by an upward sloping supply curve and a downward sloping demand curve, an excess supply situation occurs when the quantity supplied exceeds the quantity demanded. This scenario, often called a surplus, typically leads to sellers reducing prices to clear their excess inventory and attract more buyers. Therefore, when there is an excess supply in the market, prices will fall to move towards the equilibrium where quantity demanded equals quantity supplied, effectively balancing out the market.
It is at the point of equilibrium that the market price is established where no surplus or shortage exists. Below the equilibrium level, there is excess demand (shortage), whereas above it, there is excess supply (surplus). In both cases, market forces tend to push the price towards the equilibrium. Changes in market conditions or shifts in supply and demand due to various factors including tastes, income, technology, and government policies can affect this balance and thus the equilibrium price and quantity.