Market Dynamics: If supply is high and demand is down, what happens to prices?

Market Dynamics: If supply is high and demand is down, what happens to prices?

• A. Prices rise
• B. Prices fall
• C. No change
• D. Prices fluctuate unpredictably

Answer: (B)

Prices fall. The key idea is that prices move toward the point where quantity supplied equals quantity demanded. When there’s more of a good available than buyers want (high supply) and there are fewer buyers willing to purchase (down demand), excess supply appears. Sellers lower prices to attract buyers and clear the surplus, creating downward pressure on the price. This downward movement continues until a new balance is reached or external factors change either supply or demand.

Prices fall. The key idea is that prices move toward the point where quantity supplied equals quantity demanded. When there’s more of a good available than buyers want (high supply) and there are fewer buyers willing to purchase (down demand), excess supply appears. Sellers lower prices to attract buyers and clear the surplus, creating downward pressure on the price. This downward movement continues until a new balance is reached or external factors change either supply or demand.