What happens to equilibrium price if there is increasing demand for a good?

When there is an increase in demand for a good, the equilibrium price tends to rise. This relationship can be understood through the dynamics of supply and demand.

In a market, equilibrium is reached when the quantity demanded by consumers equals the quantity supplied by producers. When demand increases—perhaps due to factors such as an increase in consumer income, changing preferences, or a decrease in the price of a substitute good—more consumers are willing to purchase the good at existing prices. This surge in demand leads to a situation where the quantity demanded exceeds the quantity supplied at the previous equilibrium price.

As a result, suppliers notice that their products are selling out more quickly and start raising prices, which encourages them to produce more of the good. The increased price reflects the heightened demand, leading to a new, higher equilibrium price where the increased quantity supplied aligns with the new quantity demanded.

Thus, if demand for a good continues to rise, one would expect the equilibrium price to also increase, confirming why the selection of increasing as the correct answer is appropriate.