What occurs when demand increases while supply remains the same?

When demand increases while supply remains the same, the equilibrium price rises due to the higher competition among buyers for the available goods. This situation leads to a greater willingness to pay, pushing the price up in order to match the increased demand.

In a market, equilibrium is achieved when the quantity demanded equals the quantity supplied. If demand increases—perhaps due to factors like rising consumer preferences, increased income, or other variables—while the supply of the goods does not change, sellers respond to the higher demand by raising prices. As buyers compete for the limited supply, they are prepared to pay more to secure the product, causing the equilibrium price to move upward.

The incorrect options can be understood as follows: A decrease in equilibrium price would not occur because higher demand typically results in increased prices. If equilibrium price remained unchanged despite a rise in demand, it would not accurately reflect the market conditions since the greater demand would usually drive prices higher. A decrease in quantity demanded contradicts the concept of increased demand since a higher demand suggests consumers are wanting to buy more at the prevailing prices. Thus, with static supply in the face of rising demand, the market naturally leads to an increase in equilibrium price.