Ceteris paribus, if the market demand for a product decreases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
A)increase; increase
B)indeterminate; decrease
C)indeterminate; increase
D)decrease; decrease

Question

Ceteris paribus, if the market demand for a product decreases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.
A)​increase; increase
B)​indeterminate; decrease
C)​indeterminate; increase
D)​decrease; decrease

Quizplus · Accepted Answer

If the market demand for a product decreases, it means consumers are buying less of the product. This leads to an excess supply at the current price, which puts downward pressure on prices. As a result, producers will have to lower their prices to clear the market and reduce inventories. As prices decrease, the quantity demanded will also decrease as consumers substitute to other products or reduce their overall consumption. The new equilibrium will have a lower quantity and a lower price. Therefore, equilibrium quantity will decrease and equilibrium price will decrease.

Ceteris Paribus, If the Market Demand for a Product Decreases