What typically happens to prices when a surplus of goods exists?

When there is a surplus of goods in the market, it means that the supply exceeds the demand. In such a scenario, sellers often find themselves with more inventory than they can sell, leading to increased competition among them to attract buyers. To encourage sales and reduce excess stock, sellers may lower their prices. This price reduction is a natural market response to help restore equilibrium between supply and demand, resulting in prices tending to fall.

In contrast, a significant rise in prices usually occurs when there is a shortage, not a surplus, as demand outstrips supply. If prices were to remain unchanged or fluctuate wildly, it would not effectively address the issue of excess inventory, as those strategies wouldn't create an incentive for consumers to purchase more goods. Thus, falling prices is the typical consequence of a surplus in the market.