If both supply and demand simultaneously decrease
A) the market clearing price definitely rises, and the equilibrium quantity definitely falls.
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate.
C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate.
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.

Question

Quizplus · Accepted Answer

When both supply and demand decrease simultaneously, the effect on the market clearing price is indeterminate because it depends on the relative magnitude of the shifts in supply and demand. However, the equilibrium quantity will definitely fall as both curves shift to the left.

If Both Supply and Demand Simultaneously Decrease