If supply increases, what happens to price?
Understand the Problem
The question is asking about the relationship between supply and price in economic terms, specifically what happens to the price of a good or service when its supply increases.
Answer
The price decreases
The final answer is the price decreases
Answer for screen readers
The final answer is the price decreases
More Information
When supply increases and demand remains constant, the surplus of goods in the market causes prices to drop until equilibrium is reached.
Tips
A common mistake is to assume that an increase in supply could increase prices; however, without an increase in demand, the surplus will lead to lower prices.
Sources
- How does the law of supply and demand affect prices? - Investopedia - investopedia.com
- Econ 101: The Basics of Supply and Demand - Env-Econ - env-econ.net
- The Effect of Changes in Both Demand and Supply on Equilibrium - Inflate Your Mind - inflateyourmind.com
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