If the demand for a product rises while its supply stays the same, what is the likely effect on its market price?
Answer and explanation
Correct answer: B. The price rises, because buyers compete for the same quantity
- Step 1: Higher demand shifts the demand curve to the right.
- Step 2: With the same supply the equilibrium price rises.
Answer
The price rises.
Why not the others: Prices do not fall when demand grows, and fixed supply is the reason for the rise, not a reason for stability.
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