Question

The graph shows a point of equilibrium. If supply for a product is low but demand is high, what most likely needs to happen to achieve equilibrium? The price needs to be raised. The price needs to be lowered. The supply needs to be raised. The demand needs to be lowered.

Answer 1

The correct answer is "The price needs to raised".

In demand vs offer chart for any good, whenever there is an increase in the demand but the supply

• remains constant,

• declines

• experiences smaller growth in comparison to that of the demand

This will lead to an increase in price. As producers see a window of opportunity to get the most profit possible of an increasing wave of demand. The price will grow until the new "point of equilibrium" is reached, which is the amount the overall demanding customer is willing to pay for that good.