In the context of supply and demand, what happens when demand exceeds supply?

When demand exceeds supply, it creates a situation where consumers are willing to pay more for a limited quantity of goods or services. This imbalance leads to upward pressure on prices. When many buyers compete for a smaller amount of available products, sellers can take advantage of the demand by raising prices.

For example, if a popular product is in short supply and many consumers want it, sellers will often increase the price to maximize their revenue. This increase continues until the market reaches a new equilibrium where the quantity supplied matches the quantity demanded, albeit at a higher price level.

In this context, the other options do not accurately represent the market behavior when demand exceeds supply. Fixed prices do not respond to market dynamics, significant decreases in price would occur in the opposite scenario, and a stable price would not account for the heightened demand and limited supply impacting the overall market.