If demand rises while supply remains the same, what happens to prices?

If demand rises while supply remains the same, what happens to prices?

• A. Prices fall
• B. Prices rise
• C. Prices stay the same
• D. Prices become unpredictable

Answer: (B)

When demand increases but supply stays the same, the market experiences more buyers chasing the same amount of goods. That creates excess demand at the old price, and sellers respond by raising the price. The price climbs to reach a new balance where the fixed quantity supplied equals the higher quantity demanded at that price. In this scenario, the traded quantity tends to stay at the level of the fixed supply, while the price rises.

When demand increases but supply stays the same, the market experiences more buyers chasing the same amount of goods. That creates excess demand at the old price, and sellers respond by raising the price. The price climbs to reach a new balance where the fixed quantity supplied equals the higher quantity demanded at that price. In this scenario, the traded quantity tends to stay at the level of the fixed supply, while the price rises.