Texas Real Estate Brokerage SAE Practice Exam 2025 – All-in-One Resource for Exam Success

When discussing the relationship between demand and price, it is essential to understand the fundamental economic principle known as the Law of Demand. According to this law, as demand for a good or service increases, the price typically moves in the same direction; that is, prices tend to rise. Conversely, when demand decreases, prices tend to fall.

The rationale behind this relationship is straightforward. When consumers are willing and able to purchase more of a product, sellers recognize that they can charge higher prices due to the increased competition among buyers for the limited available supply. This rising price incentivizes producers to supply more of the product to capitalize on the heightened demand.

In contrast, if demand decreases, sellers may lower prices to stimulate interest and encourage sales in order to clear excess inventory. Thus, the movement of demand and price is correlated in such a way that they tend to follow the same directional trend—both rising or both falling together. This explanation highlights why the correct answer accurately reflects the established economic principle.