The equilibrium price of a good will rise in response to either a rise in demand or a fall in supply.

Question

Quizplus · Accepted Answer

When there is a rise in demand, the equilibrium price of a good will increase because there is more competition for the limited supply, and producers can charge higher prices. Similarly, when there is a fall in supply, the equilibrium price will also increase because there is less supply available to meet the demand. Therefore, both a rise in demand and a fall in supply will result in an increase in the equilibrium price.

The Equilibrium Price of a Good Will Rise in Response