In which situation would prices likely rise?

Prices tend to rise in situations where demand exceeds supply. This occurs when consumers want more of a product than what is available in the market. When demand increases and supply cannot meet this heightened demand, sellers can take advantage of the situation by raising prices. This price adjustment serves to balance the market, as higher prices may discourage some consumers from purchasing the product, ultimately aligning demand with the limited supply.

In contrast, when there is a surplus of goods, or when supply exceeds demand, prices typically fall as sellers compete to attract buyers by lowering their prices. Similarly, if production costs decrease, this can lead to lower prices as producers can afford to sell their goods for less while still making a profit. Thus, the relationship between demand and supply is critical in determining price movements in the market, and an imbalance favoring demand leads to price increases.