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If demand remains constant and supply decreases, then the price will rise.

The law of supply and demand says that a price will move either up or down based on the balance of supply and demand.

As the supply decreases, prices will move higher because the product is more scarce. As supply increases, prices will move lower because the product is readily available.

For instance, suppose there is a drought and wheat is in short supply. The price of flour and bread will increase because people still want to buy them but they are in short supply. On the other hand, if there is a bumper crop and wheat is plentiful, the cost will drop as farmers compete to sell their crops.

Prices are also affected by demand. Several years ago, Beanie Babies were in great demand as collector items so prices soared. Today, however, the demand is much lower so prices have dropped greatly (with basically the same supply on the market).

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17y ago

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