If the demand for a good or service increases, how will prices affect supply?
A.
Rising prices will boost supply.
B.
Falling prices will decrease supply.
C.
Rising prices will decrease supply.
D.
Falling prices will boost supply
C. Rising prices will decrease supply.
C. Rising prices will decrease supply.
The correct answer is C. Rising prices will decrease supply.
When the demand for a good or service increases, it signals that more people want to purchase that item. In response, producers and suppliers may be inclined to increase the quantity of the good or service they supply to the market, hoping to take advantage of the higher prices and greater demand. However, this decision is ultimately based on the cost of production.
If the cost of producing the good or service remains constant or increases, producers may be reluctant to increase their supply, even in the face of higher prices. In this scenario, the higher prices do not lead to a boost in supply. Instead, the limited supply may result in higher prices as producers prioritize profitable sales.
It is important to remember that while demand determines the quantity of a good or service that consumers want to purchase, supply reflects the quantity of the good or service that producers are willing and able to provide at different price levels. The relationship between demand and supply can impact market equilibrium, quantities supplied, and prices.