Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-maximizing level of output.For the individual firm,this would result in:

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When there is a decrease in market demand, the market price for the good will also decrease. Price-taking firms will have to lower their own prices in order to remain competitive. As a result, the profit-maximizing quantity of output for each individual firm will decrease because they will be selling fewer units at a lower price. This is consistent with the law of demand, which states that as the price of a good decreases, the quantity demanded of that good will increase.

Assume There Is a Decrease in the Market Demand for a Good