How does "supply and demand" affect property prices in real estate?

The understanding of supply and demand is fundamental in economics, particularly in real estate, where it plays a critical role in determining property prices. When the number of available properties (supply) is compared to the number of potential buyers (demand), it creates a direct impact on pricing.

When demand for properties outstrips supply, prices tend to rise, as buyers compete for fewer available options. Conversely, if there are more properties available than there are buyers, the increased supply can lead to lower prices, as sellers may need to reduce their asking prices to attract buyers.

This dynamic of supply and demand illustrates why choice C accurately reflects the relationship in real estate markets across residential, commercial, and industrial segments. It highlights that property prices are influenced by the interplay between how many properties are on the market and the number of buyers looking to purchase, making it a pivotal concept for understanding market fluctuations and pricing strategies.