Question

What happens when demand exceeds supply?

Answer 1

Answer:  Option 'b' is correct.

Step-by-step explanation:

Since we have that

When Demand exceeds supply.

It means money supply is more in the country due to which demand for a good increased more than supply.

It is the situation of inflation.

In this case, price would increase to curb the increase in demand.

For example, if the prevaling price for a particular good is $5, so a person is willing to purchase 10 units as he has $50.

But if the price gets increased and the new price becomes $10, then that person can buy only 5 units from $50.

So, it can reduce the demand and makes it equal to supply.

So, Option 'b' is correct.