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

Question

Quizplus · Accepted Answer

An increase in price and decrease in quantity can only occur due to a decrease in supply or a decrease in demand. Since the question states that the equilibrium price increases, it rules out option C which requires both an increase in demand and supply. Therefore, the only valid option is B which implies a decrease in supply with constant demand.

Suppose That the Equilibrium Price of T-Shirts Increases and the Equilibrium