In a market, when demand increases and supply stays the same, what happens to price?

• A. Price falls
• B. Price rises
• C. No change
• D. Price drops

Answer: (B)

When demand increases while supply stays the same, the demand curve shifts to the right. With the same amount of goods available, the higher level of demand pushes the market to a higher equilibrium price because buyers compete more for the same quantity. The price rises until the quantity supplied matches the new, higher quantity demanded. If the price were to fall or stay the same, it would mean demand didn’t rise or supply increased, which isn’t the situation here.