Which market condition occurs when demand exceeds supply causing higher prices?

Which market condition occurs when demand exceeds supply causing higher prices?

• A. Buyers Market
• B. Sellers Market
• C. Price Competition
• D. Free Enterprise Economy

Answer: (B)

When demand outstrips supply, prices rise because there isn’t enough of the good to go around. This scarcity gives sellers more power to raise prices and accelerate sales, since buyers must compete for the limited quantity. The situation is classic for a seller’s market: inventories are tight, transactions move quickly, and sellers often benefit from higher prices. This contrasts with a buyers’ market, where supply exceeds demand and prices tend to fall as buyers have more choices. The key effect here is that scarcity drives higher prices and shifts advantage toward sellers.

When demand outstrips supply, prices rise because there isn’t enough of the good to go around. This scarcity gives sellers more power to raise prices and accelerate sales, since buyers must compete for the limited quantity. The situation is classic for a seller’s market: inventories are tight, transactions move quickly, and sellers often benefit from higher prices. This contrasts with a buyers’ market, where supply exceeds demand and prices tend to fall as buyers have more choices. The key effect here is that scarcity drives higher prices and shifts advantage toward sellers.