question archive If supply and demand for a good both decrease, which of the following is true? A
If supply and demand for a good both decrease, which of the following is true? A
Subject:MarketingPrice:2.88 Bought3
If supply and demand for a good both decrease, which of the following is true?
A. Equilibrium price will increase but we cannot say for sure what will happen to the equilibrium quantity.
B. Equilibrium price will decrease but we cannot say for sure what will happen to the equilibrium quantity.
C. Equilibrium quantity will increase but we cannot say for sure what will happen to the equilibrium price.
D. Equilibrium quantity will decrease but we cannot say for sure what will happen to the equilibrium price.
E. Equilibrium price and quantity will both decrease.
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- The correct option is D. Equilibrium quantity will decrease but we cannot say for sure what will happen to the equilibrium price.
We know that a decrease in the supply raises the price level and reduces the quantity whereas a decline in the demand reduces both the price and quantity. Therefore, in this case, the equilibrium quantity will definitely decline where the equilibrium price will remain indeterminate.
