What happens when there is a decrease in supply, but demand remains constant? Market equilibrium price falls Market equilibrium price rises Market equilibrium quantity rises Market equilibrium quantity falls
Question
What happens when there is a decrease in supply, but demand remains constant? Market equilibrium price falls Market equilibrium price rises Market equilibrium quantity rises Market 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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A decrease in supply means that there are fewer goods available for sale.
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If demand remains constant, it means that the same number of consumers are still willing and able to purchase the goods at the current price.
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Because there are fewer goods available but the same number of consumers wanting to buy, sellers can charge a higher price for their goods. This is why the market equilibrium price rises.
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At the same time, because there are fewer goods available, the total quantity of goods that can be sold (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
How is a market equilibrium affected by a simultaneous decrease in both supply and demand? The price may rise, fall, or remain unchanged The price will certainly rise The price will certainly fall There will be no effect on price
What will happen as a result of a decrease in supply?Multiple ChoiceEquilibrium price and quantity both rise.Equilibrium price and quantity both fall.Equilibrium price rises and equilibrium quantity falls.Equilibrium price falls and equilibrium quantity rises.
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