If demand for real estate falls, then:

If demand for real estate falls, then:

• A. Supply will increase, lowering prices.
• B. Supply will decrease, increasing prices.
• C. Prices will rise due to government intervention.
• D. Demand and supply are unaffected.

Answer: (A)

When demand falls, buyers are less willing to pay, which pushes the market toward a lower-price equilibrium. As prices drop, more sellers (or existing listings) enter the market or accept lower offers, effectively increasing supply. That bigger supply at the new lower price puts additional downward pressure on prices. So the idea that supply increases and prices fall fits the way a market adjusts to weaker demand. The other options don’t fit because a drop in demand doesn’t typically cause supply to decrease and prices to rise, and government intervention is not assumed in a simple supply-and-demand model.

When demand falls, buyers are less willing to pay, which pushes the market toward a lower-price equilibrium. As prices drop, more sellers (or existing listings) enter the market or accept lower offers, effectively increasing supply. That bigger supply at the new lower price puts additional downward pressure on prices. So the idea that supply increases and prices fall fits the way a market adjusts to weaker demand. The other options don’t fit because a drop in demand doesn’t typically cause supply to decrease and prices to rise, and government intervention is not assumed in a simple supply-and-demand model.