A decrease in demand coupled with a decrease in supply results in a(n)
A) increase in equilibrium price and a decrease in equilibrium quantity
B) decrease in equilibrium price and a decrease in equilibrium quantity
C) increase in equilibrium price and a increase in equilibrium quantity
D) ambiguous effect of equilibrium price and a decrease in equilibrium quantity
E) ambiguous effect on equilibrium price and a increase in equilibrium quantity

Question

Quizplus · Accepted Answer

When both demand and supply decrease, the equilibrium quantity will definitely decrease, but the effect on equilibrium price is ambiguous because it depends on the relative magnitudes of the shifts in demand and supply.

A Decrease in Demand Coupled with a Decrease in Supply