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

Supply and price typically move in what kind of relationship?

1. Same direction

2. Opposite directions

3. Linear fashion

4. Constant correlation

The correct answer is: Opposite directions

In the context of economics and real estate, supply and price typically have an inverse relationship. This means that as the supply of a good or service increases, the price generally decreases, and conversely, if the supply decreases, prices tend to increase. This principle is a fundamental concept in the law of supply and demand. When there is a surplus of properties available on the market, buyers have more options, which can lead to a decrease in prices as sellers compete to attract buyers. Conversely, if there is a limited supply of properties available, competition among buyers can drive prices up, as fewer options mean that buyers may be willing to pay more to secure a property. This relationship highlights that supply fluctuations can directly influence market prices, making it essential for real estate professionals to understand and anticipate these dynamics when advising clients or making investment decisions. Understanding the inverse relationship between supply and price is critical for effective market analysis in real estate.