In a market economy, market forces called supply and demand determine price and rate of production. Supply is the amount of available goods and services. Demand is the desire of customers to purchase a given good or service. If demand is low and supply is high, prices decrease. If supply is low and demand is high, prices rise. When demand surpasses supply, it is in the best interest of a business to increase production to meet the demand for their product. Conversely, as demand decreases, businesses will likely decrease their rate of production. In theory, there is an equilibrium price for any good or service. The equilibrium price is the price at which a business sells every unit of a product they create and every consumer who wants that product can get it. In other words, equilibrium is achieved when supply matches demand perfectly. Nikola’s t-shirt business produced 100 shirts. In less than one day, all 100 shirts sold out. Fifty additional orders were placed, but could not be fulfilled since he had run out of shirts. Which of the following is true? A
There was more supply than demand.
B
There was more demand than supply.
C
Supply and demand were about equal.
D
The rate of production exceeded demand.
