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

Of course they could. But now you’ve got a shortage. Instead of selling to the people who agree to pay more, you sell to the people who get to the store first. You still have 100 customers who want to buy that product, and only 50 things to sell. Somebody’s going to be unhappy. Somebody’s not getting the TransGoJobot for Christmas.