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

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

Answer: (B)

When demand increases while supply stays the same, the price goes up. The demand curve shifts to the right, meaning at every price buyers want to purchase more than before. Since the supply is fixed, this higher demand at the existing price creates excess demand, pushing the market toward a higher equilibrium price. The new equilibrium price is higher, and the quantity traded also increases because more buyers are willing to buy at the higher price and sellers supply more to meet that demand. This is why price rises in this scenario.