In a seller's market, how does competition typically affect prices?

In a seller's market, the dynamics of supply and demand significantly influence pricing. A seller's market occurs when the demand for a product or service exceeds the supply available, giving sellers a competitive advantage. As buyers are eager to purchase, they may be willing to pay more to secure the scarce resources. This increased competition among buyers can lead to upward pressure on prices, resulting in a general trend of prices rising.

Sellers, recognizing the high demand and limited supply, can increase their prices without losing customers, as buyers are often motivated by urgency or the fear of missing out on the available product. This scenario creates an environment where bidding wars may occur, further sustaining or amplifying price increases. Therefore, in a seller's market, prices typically rise as sellers leverage their advantageous position.