What does an increase in demand typically lead to in terms of prices?

An increase in demand typically leads to an increase in prices due to the fundamental principles of supply and demand in economics. When more consumers desire a product or service, they are usually willing to pay more for it. This heightened demand can outpace the current supply, creating a situation where sellers can raise their prices.

For instance, if a new smartphone is released and consumer interest is exceptionally high, the demand will surge. If supply does not increase proportionately to meet this demand, the price is likely to rise as consumers compete for the available units. This relationship is a cornerstone of market dynamics, illustrating how consumer behavior directly influences pricing.

In contrast, a decrease in demand would typically lead to a decrease in prices, stabilization might occur if demand and supply reach balance, and no effect would suggest that prices remain unchanged regardless of demand changes, which is unrealistic in a typical market situation.