when supply decreases and demand increases what happens to the prince of a good?
Decrease
I think it will C. Decreases
When the supply of a good decreases and the demand for it increases, the price of the good generally increases. This is due to the basic principles of supply and demand.
To further understand this, let's break it down:
1. Supply and Demand: Supply refers to the quantity of a good that sellers are willing to sell at different price levels, while demand refers to the quantity of that good that buyers are willing to purchase at different price levels. These two factors interact to determine the price of a good in the market.
2. Decrease in Supply: If the supply of a good decreases, it means that sellers are offering fewer quantities of the good for sale. This can occur due to various reasons, such as a decrease in production or a decrease in the availability of inputs required to produce the good.
3. Increase in Demand: On the other hand, if the demand for a good increases, it means that buyers want to purchase more quantities of that good. This can occur due to factors like changes in consumer preferences, an increase in population, or an increase in advertising and promotion.
4. Price Adjustment: When the supply of a good decreases and the demand for it increases, there is a scarcity of the good in the market. In response to this scarcity, buyers become more willing to pay a higher price to obtain the limited supply. As a result, the price of the good tends to rise.
5. Equilibrium: The price will continue to rise until a new equilibrium is reached, where the quantity demanded equals the quantity supplied at a higher price level. At this new equilibrium, the market clears, and the price settles at a higher level.
In summary, when supply decreases and demand increases, the price of a good will typically increase as buyers compete for the limited available supply.