Exhibit 4-6 Demand and supply curves

If market supply decreases and, simultaneously, market demand increases, the new equilibrium will show:

Question

Exhibit 4-6 Demand and supply curves

If market supply decreases and, simultaneously, market demand increases, the new equilibrium will show:

Quizplus · Accepted Answer

When market supply decreases and market demand increases, the equilibrium price will increase. However, the effect on quantity exchanged is uncertain since both factors are changing. It could increase if the increase in demand is greater than the decrease in supply, or it could decrease if the decrease in supply is greater than the increase in demand, or it could remain the same if the changes in supply and demand are equal.

Exhibit 4-6 Demand and Supply Curves