In a perfectly competitive market, a decrease in the market demand will ultimately lead to firms ______in the market and a _______ market equilibrium quantity.

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In a perfectly competitive market, firms are price takers and cannot influence the market price. A decrease in market demand means consumers are willing to purchase less of the good at any given price. As a result, firms will experience a decrease in sales and revenue, leading to losses. In the long run, this will lead to some firms exiting the market as they are unable to cover their costs, resulting in fewer firms in the market. Moreover, with fewer firms, the market supply decreases, which will cause the price to rise. The higher price will reduce the quantity demanded further, but the market equilibrium quantity will be lower than before the decrease in demand.

In a Perfectly Competitive Market, a Decrease in the Market