What is a seller's market?

A seller's market occurs when demand for a product or service significantly exceeds its supply. This situation gives sellers the advantage because buyers are competing for limited products or services, often leading to higher prices. In such a market, sellers can be more selective about whom they sell to and may have the power to set prices at a level that maximizes their profit due to the lack of available alternatives for buyers.

In contrast, a market where supply exceeds demand would typically favor buyers, leading to lower prices and more choices. A balanced market where demand equals supply tends to stabilize prices, providing no distinct advantage to either party. The option that specifies a market in which only sellers can dictate prices, while partially true in a seller's market scenario, does not fully encapsulate the core definition of the condition based on the balance of supply and demand.