According to the relationship between supply, demand, and price: as supply decreases, what is likely to happen to demand and price?

A.

Demand will decrease, and price will decrease.

B.

Demand will decrease, and price will increase.

C.

Demand will increase, and price will decrease.

D.

Demand will increase, and price will increase.

According to the relationship between supply, demand, and price: as supply decreases, what is likely to happen to demand and price?

The answer is (D) - Demand will increase, and price will increase.

D. Demand will increase, and price will increase.

Explanation:

Supply and demand are proportional. If you cut out the factor of price and see it as just those two factors, it is easy to understand that if one falls, the other rises. This goes both ways;

If supply falls, demand (and subsequently price, since stores need to maintain stock) will rise.

If demand falls (this also means that price falls), then a product will be in abundance, and supply rises.