Question

If the demand for an item increases,what effect will it have an price and quantity? A) price will increase and quantity increas. B) price will increase and quantity decrease. c) price will decrease and quantity decrease. d) price will decrease and quantity decrease

Answer 1

Answer:

A) price will increase and quantity increase.

Explanation:

An increase in demand means more customers are willing and can afford to buy a product. Holding the other factors constant, an increase in demand results in many potential buyers chasing very few goods. The competition for the few goods leads to an increase in their prices. The equilibrium point moves up the graph to a new higher position as a result of an increase in demand.

As per the law of supply, quantity supplied increases as prices rise. Profit motives drive all business establishments. As prices increase due to increased demand, suppliers will be motivated to supply more to take advantage of high prices.