What occurs to the price of a commodity when supply decreases while demand remains unchanged?

What occurs to the price of a commodity when supply decreases while demand remains unchanged?

• A. Rise
• B. Drop
• C. Be unaffected
• D. Go in the direction of supply

Answer: (A)

When the supply of a commodity decreases while demand remains unchanged, the price of that commodity will typically rise. This is due to the basic economic principle of supply and demand. When the supply of a product is reduced, there are fewer units available in the market. If consumers still want to purchase the same amount of the product (demand is unchanged), the competition among buyers for the limited available quantity tends to push prices up. This scenario is often illustrated in economic graphs where a leftward shift in the supply curve results in a higher equilibrium price, given that demand stays stable. The fundamental takeaway is that a decrease in supply with constant demand creates upward pressure on prices, leading to an increase.

When the supply of a commodity decreases while demand remains unchanged, the price of that commodity will typically rise. This is due to the basic economic principle of supply and demand. When the supply of a product is reduced, there are fewer units available in the market. If consumers still want to purchase the same amount of the product (demand is unchanged), the competition among buyers for the limited available quantity tends to push prices up. This scenario is often illustrated in economic graphs where a leftward shift in the supply curve results in a higher equilibrium price, given that demand stays stable. The fundamental takeaway is that a decrease in supply with constant demand creates upward pressure on prices, leading to an increase.