Which of the following statement is TRUE of the effect of changes in demand and supply on price?

Answer Details

The statement that is true regarding the effect of changes in demand and supply on price is that an increase in supply will lead to a fall in price and a rise in the quantity bought and sold. This is because, in a competitive market, an increase in supply of a good or service will lead to a surplus of the product, which will force sellers to lower prices in order to sell their excess inventory. As prices decrease, the quantity demanded by buyers will increase, leading to a rise in the quantity bought and sold. Conversely, a decrease in supply will lead to a shortage of the product, which will drive prices up as sellers compete for the limited supply. As prices increase, the quantity demanded by buyers will decrease, leading to a fall in the quantity bought and sold. An increase in demand will also lead to a rise in the price and quantity bought and sold, while a decrease in demand will lead to a fall in both price and quantity bought and sold.