Suppose you are told that the equilibrium price of bananas has increased, while the equilibrium quantity of bananas has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?
A) Demand increased.
B) Demand decreased.
C) Supply increased.
D) Supply decreased.

Question

Quizplus · Accepted Answer

Since both the equilibrium price and quantity have moved in opposite directions, we can infer that there has been a shift in the supply curve, not the demand curve. Specifically, a decrease in supply would lead to a higher equilibrium price and a lower equilibrium quantity. Therefore, the correct answer is D) Supply decreased.

Suppose You Are Told That the Equilibrium Price of Bananas