University Of Central Florida (UCF) ECO2013 Principles Of Macroeconomics Practice Exam 1

When demand increases while supply remains constant, the market experiences a shift in equilibrium. The increase in demand means that more consumers are willing to purchase a good or service at every price level. Because the supply does not change, the existing quantity available becomes more scarce relative to the heightened demand. As a result, sellers may raise prices due to the increased competition among buyers who are eager to acquire the limited goods available. This upward pressure on prices continues until a new equilibrium is reached, where the quantity demanded balances with the quantity supplied at a higher price. Thus, an increase in demand leads to an increase in price when supply remains unchanged, making this the correct understanding of market dynamics in this situation.