If price decreases, which statement best describes the relationship between demand and supply?

If price decreases, which statement best describes the relationship between demand and supply?

• A. Demand is declining in relation to supply
• B. Demand increases with supply
• C. Supply exceeds demand
• D. Price elasticity increases

Answer: (C)

When price moves, demand and supply respond in opposite ways. A decrease in price makes more buyers want to purchase the good, so quantity demanded rises, while producers are less willing to produce at the lower price, so quantity supplied falls. This combination pushes the market toward a point where demand is greater than supply, creating a shortage. In that situation, buyers are willing to purchase more than sellers are offering, and pressure on price tends to push it back up toward equilibrium. A surplus—where supply exceeds demand—occurs when the price is higher than the equilibrium level, not when it decreases. So the outcome of a price drop is that demand exceeds supply, leading to a shortage and upward pressure on price to restore balance.

When price moves, demand and supply respond in opposite ways. A decrease in price makes more buyers want to purchase the good, so quantity demanded rises, while producers are less willing to produce at the lower price, so quantity supplied falls. This combination pushes the market toward a point where demand is greater than supply, creating a shortage. In that situation, buyers are willing to purchase more than sellers are offering, and pressure on price tends to push it back up toward equilibrium. A surplus—where supply exceeds demand—occurs when the price is higher than the equilibrium level, not when it decreases. So the outcome of a price drop is that demand exceeds supply, leading to a shortage and upward pressure on price to restore balance.