Suppose that the equilibrium price of rice falls and the equilibrium quantity falls. Which of the following best fits the observed data?
A)An increase in demand with supply constant.
B)An increase in demand coupled with a decrease in supply.
C)An increase in demand coupled with an increase in supply.
D)A decrease in demand with supply constant.

Question

Quizplus · Accepted Answer

Since both the equilibrium price and equilibrium quantity has fallen, it suggests a decrease in demand with supply constant. Option A is incorrect because an increase in demand would result in the equilibrium quantity rising, not falling. Option B is incorrect because both the equilibrium price and quantity cannot fall if there is a decrease in supply as well as an increase in demand. Option C is incorrect because an increase in both demand and supply would lead to an increase in equilibrium quantity, not a decrease.

Suppose That the Equilibrium Price of Rice Falls and the Equilibrium