In a perfectly competitive market,in response to a permanent decrease in demand:

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Quizplus · Accepted Answer

In the short run, firms cannot adjust their production capacities to the decrease in demand. This leads to excess supply in the market, causing prices to fall below the original equilibrium price. In the long run, firms can exit the market, leading to a decrease in supply, and eventually restoring equilibrium at a lower price than before. Therefore, the short run equilibrium price will be lower than the eventual long run equilibrium price.

In a Perfectly Competitive Market,in Response to a Permanent Decrease