When demand for a good increases and supply decreases, what will happen to the equilibrium price?

When demand for a good increases while supply decreases, the interplay between these two forces leads to a clear change in the equilibrium price. An increase in demand means consumers are willing to purchase more of the product at any given price, indicating stronger consumer preferences or needs. Conversely, a decrease in supply suggests that there is less of the good available in the market, which can occur due to various factors such as production constraints, increased costs, or external disruptions.

These two shifts—demand increasing and supply decreasing—combine to create higher competition among consumers for a limited product. As more consumers are vying for fewer goods, sellers are able to raise prices, leading to an overall increase in the equilibrium price. This dynamic underlines the basic principles of supply and demand, where increased demand in the face of reduced supply drives prices upward.