When prices rise, what happens to the quantity demanded and supplied?

When prices rise, the quantity demanded typically falls and the quantity supplied increases. This relationship is fundamental to the law of demand and the law of supply in economics.

As prices increase, consumers tend to buy less of a good or service because the cost becomes higher compared to their budget or the perceived value of the product. This leads to a decrease in the quantity demanded. Conversely, higher prices serve as an incentive for producers to supply more of the product because they are motivated by the potential for greater revenue and profit margins. Therefore, as prices rise, producers are willing to supply a larger quantity to the market, resulting in an increase in the quantity supplied.

This interaction between price changes and the behavior of consumers and producers illustrates the dynamics of supply and demand in a market economy, reinforcing the idea that an increase in price leads to a decrease in the quantity demanded and an increase in the quantity supplied.