What happens when there is a decrease in supply, but demand remains constant?Market equilibrium price fallsMarket equilibrium price risesMarket equilibrium quantity risesMarket equilibrium quantity falls
Question
What happens when there is a decrease in supply, but demand remains constant?Market equilibrium price fallsMarket equilibrium price risesMarket equilibrium quantity risesMarket equilibrium quantity falls
Solution
When there is a decrease in supply, but demand remains constant, the market equilibrium price rises and the market equilibrium quantity falls.
Here's why:
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Decrease in Supply: When the supply of a product decreases, there are fewer products available for the same number of buyers (since demand remains constant).
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Price Increase: Because there are fewer products available, buyers are willing to pay more to secure the product. This leads to an increase in the market equilibrium price.
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Quantity Falls: However, because the price has increased, fewer units of the product are sold. This leads to a decrease in the market equilibrium quantity.
So, in summary, when supply decreases but demand remains constant, the market equilibrium price rises and the market equilibrium quantity falls.
Similar Questions
What happens to the market equilibrium if supply decreases and demand increases? The equilibrium price will increase and the quantity will decrease The equilibrium price will decrease and the quantity will increase The equilibrium price and quantity will both increase The equilibrium price and quantity will both decrease
What effect will a decrease in demand and an increase in supply have on equilibrium price ?Equilibrium price will fall Equilibrium price will rise Equilibrium price will be constant Sometimes price will rise and sometimes it will fall
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