Economics for Hawaii Teachers Practice Test

An increase in demand typically leads to an increase in prices due to the basic principles of supply and demand. When more consumers want a particular good or service, they are willing to pay more for it, which creates upward pressure on prices.

As demand increases and consumers are competing for the same quantity of goods, sellers can raise prices, knowing that buyers are likely to purchase at those higher prices. If the supply does not increase to match the higher demand, the result is a market scenario where available goods become more valuable, hence the increase in prices.

This dynamic illustrates one of the fundamental concepts of market economics: when demand increases while supply remains constant, prices must rise to reach a new equilibrium where quantity supplied equals quantity demanded.