Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:
A) shortage.
B) surplus.
C) its initial equilibrium.
D) a new equilibrium.

Question

Quizplus · Accepted Answer

A sudden decrease in supply would cause the quantity supplied to be lower than the quantity demanded, leading to a shortage. The price would need to increase to reach a new equilibrium, but at the moment immediately following the decrease in supply, there would not yet be a new equilibrium.

Imagine a Free Market in Equilibrium