When demand for a good increases but its supply decreases, the following outcomes are likely to occur:
1. The price for the good increases: With higher demand and lower supply, the market equilibrium is disrupted, leading to an increase in the price of the good. This is because consumers are willing to pay more to obtain the limited supply, resulting in a higher price point.
2. Potential shortage: Due to the imbalance between demand and supply, there is a risk of a shortage occurring in the market. Consumers may find it challenging to purchase the good at the desired quantity or price, which can create scarcity in the marketplace.
3. Opportunity for price gouging: In situations where demand outstrips supply, sellers may take advantage of the scarcity by engaging in price gouging. This unethical practice involves significantly increasing prices to exploit consumers who urgently need the product.
In conclusion, when demand rises while supply decreases, the price of the good tends to increase, potentially leading to shortages and opportunities for price gouging in the market.
