Question

.Over the past decade, cruise lines have dramatically increased their number of megaships (those that carry 3,000 passengers or more), increasing the supply of cruises. At the same time, the popularity of cruising has increased among consumers, increasing demand. What must happen for the average price to decrease?

Increase supply greater than demand.

Supply and demand should increase at the same rate.

Nothing; average price will decrease with the implied changes in supply and demand.

Increase demand greater than supply.

Answer 1

The law of supply and demand would state that if supply grows faster than demand, prices will trend downward. In this case, the cruise line would need to add more ships than people who want to go on those ships.