A competitive market is in equilibrium.Then there is a decrease in demand and a decrease in supply.The equilibrium price ________,and the equilibrium quantity ________.
A) rises; decreases
B) perhaps changes but we can't say if it rises, falls, or stays the same; decreases
C) falls; increases
D) perhaps changes but we can't say if it rises, falls, or stays the same; increases
E) rises; increases

Question

Quizplus · Accepted Answer

When both demand and supply decrease, the effect on equilibrium quantity is straightforward—it decreases because there are fewer goods being bought and sold. However, the effect on price is ambiguous without knowing the relative magnitudes of the demand and supply decreases. If demand decreases more than supply, the price could fall. If supply decreases more than demand, the price could rise. If they decrease by the same amount, the price might stay the same.

A Competitive Market Is in Equilibrium