Why is it that in economics, when demand is greater than supply, prices “automatically” go up? Isn’t it sellers that decide to raise prices because buyers are willing to pay more? Couldn’t sellers choose to not raise prices?

Question

Why is it that in economics, when demand is greater than supply, prices “automatically” go up? Isn’t it sellers that decide to raise prices because buyers are willing to pay more? Couldn’t sellers choose to not raise prices?

In: 821

Answer 1

Economics speak. For commodities resellers would arbitrage the goods.

In 5 year old speak. For things like corn, cars, PlayStation 5, bacon etc. If you don’t raise prices someone else will come along and buy your stuff and then resell it to someone else for more money and keep the profit. To the buyer the price is higher.