Holding demand constant, a reduction in supply leads to
A) lower prices and higher quantity demanded.
B) lower prices and lower quantity demanded.
C) higher prices and higher quantity demanded.
D) higher prices and lower quantity demanded.

Question

Quizplus · Accepted Answer

When supply decreases while holding demand constant, there will be less of a good available in the market, which typically leads to an increase in price. As the price increases, consumers will generally purchase less of the good, resulting in a decrease in the quantity demanded. Therefore, the correct choice is D, higher prices and lower quantity demanded.

Holding Demand Constant, a Reduction in Supply Leads to