What happens to prices when demand increases in a market economy?

When demand increases in a market economy, prices generally rise. This is because the increased demand for a good or service creates a shortage, as the supply remains constant. In response to this shortage, sellers can raise prices, as consumers are willing to pay more to obtain the limited available goods or services. This increase in price serves as a signal to producers to increase production, which can eventually lead to an increase in supply. As the supply catches up with demand, prices may stabilize or decrease. However, the initial effect of increased demand is typically an increase in prices.