Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

As demand increases, what typically happens to prices?

1. Remain Stable

2. Decrease

3. Increase

4. Vary

The correct answer is: Increase

When demand for a good or service increases, prices typically increase as well. This phenomenon can be understood through the basic principles of supply and demand, which are fundamental concepts in economics. When more people want to purchase a product or service than what is currently available, competition among buyers drives up the price. In real estate, for instance, if a desirable neighborhood experiences an increase in population or interest, the demand for homes in that area will rise. As buyers compete for a limited number of homes, sellers can often command higher prices. This upward pressure on prices is a direct result of increased demand relative to supply. While prices may sometimes remain stable or fluctuate due to various factors such as economic conditions or changes in the market, the general trend in a scenario of rising demand is that prices are likely to go up. Thus, the correct choice accurately reflects this economic principle.