According to the principle of supply and demand, what happens when the supply of an item increases?

The principle of supply and demand is a fundamental concept in economics that describes how the availability of a product or asset (supply) and the desire for that product or asset (demand) interact to determine its market value. When the supply of an item increases significantly while demand remains unchanged, it typically leads to a decrease in its value. This is because more of that item is available in the market than consumers want to purchase at the existing price. As a result, sellers may lower prices to encourage buyers to purchase the surplus, leading to a decrease in value.

In contrast, if demand were to increase or supply decrease, the value might rise due to the increased competition among buyers for the limited items available. When supply and demand are more balanced, values may stabilize but are less likely to remain constant when one side significantly shifts. A scenario with fluctuating values unpredictably could arise in volatile markets, but this does not represent the direct relationship established by the principle when supply alone increases. Therefore, the assertion that value decreases as supply increases is consistent with market behavior in competitive economies.