Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Demand increases leading to higher prices and supply adjustments.
B
Supply decreases causing demand to remain unchanged.
C
Both supply and demand remain constant, preventing any changes in price.
D
Demand decreases resulting in lower prices and supply adjustments.
Understanding the Answer
Let's break down why this is correct
Answer
In a competitive market, supply and demand work together to find a balance known as equilibrium. When demand for a product increases, prices tend to rise because more people want to buy it. This higher price encourages producers to make more of the product, increasing supply. Over time, as more products are available and the price stabilizes, the market reaches a point where the quantity supplied equals the quantity demanded, creating equilibrium. For example, if a new smartphone becomes popular, its price may go up, leading manufacturers to produce more, until the market has just the right amount that people want to buy at that price.
Detailed Explanation
When demand goes up, people want more products. Other options are incorrect because This suggests that if supply goes down, demand stays the same; This implies nothing changes.
Key Concepts
Supply and demand
Topic
Long-Run Equilibrium Adjustments
Difficulty
easy level question
Cognitive Level
understand
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