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
Question
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
Solution
Market equilibrium is determined by the intersection of the supply and demand curves. When both supply and demand decrease simultaneously, the effect on price is uncertain without additional information.
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If the decrease in demand is greater than the decrease in supply, the demand curve will shift more to the left than the supply curve. This will result in a lower equilibrium price.
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If the decrease in supply is greater than the decrease in demand, the supply curve will shift more to the left than the demand curve. This will result in a higher equilibrium price.
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If the decrease in supply and demand are equal, the supply and demand curves will shift to the left by the same amount. This will result in the same equilibrium price.
So, the price may rise, fall, or remain unchanged depending on the relative shifts in the supply and demand curves.
Similar Questions
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
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 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
How is market equilibrium affected when there is an increase in demand, holding everything else constant? Price and quantity both increase Price increases and quantity decreases Price decreases and quantity increases Price and quantity both decrease
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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