A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and
automatically returns the price of X to its initial level.

Question

Quizplus · Accepted Answer

A decrease in supply of X would result in a higher equilibrium price initially, but it would not necessarily reduce the demand for X. If the price increase is significant enough, it may discourage some consumers from buying X, but others may still be willing to pay the higher price. The price will only return to its initial level if the decrease in demand due to the higher price is significant enough to offset the initial increase in price caused by the decrease in supply.

A Decrease in Supply of X Increases the Equilibrium Price