Final answer:
When supply decreases and demand stays constant, the price tends to rise. The relationship between supply, demand, and pricing is a fundamental concept in economics that governs how goods are priced in a market. Interest rates in the financial market are also impacted by changes in supply and demand for financial capital.
Step-by-step explanation:
When the supply of a commodity decreases while demand remains the same, the price of the commodity tends to rise. This is because the same amount of demand is now chasing fewer goods, which typically leads to increased competition for those goods and higher prices. The correct answer to the question is D) Price tends to rise. Various factors can affect how much the price rises, including personal preferences and the elasticity of demand for the product. Moreover, the price of a good impacts how much is demanded; as the price of a good rises, households will generally demand less of that good because it becomes more expensive or outside of their budget.
Regarding the financial market, when there is a rise in supply of funds in the market (such as with increased savings or foreign investment), this can lead to a decline in interest rates, as lenders have more capital to lend and may reduce rates to attract borrowers. Conversely, a rise in demand for loans can lead to an increase in the quantity of loans made and received if supply follows to meet the demand.