A decrease in the demand for eggs due to changes in consumer tastes,accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu,will result in
A)a decrease in the equilibrium quantity of eggs and no change in the equilibrium price.
B)a decrease in the equilibrium price of eggs and no change in the equilibrium quantity.
C)a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or decrease.
D)a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or decrease.

Question

Quizplus · Accepted Answer

When there is a decrease in both demand and supply, the equilibrium quantity will definitely decrease. However, the impact on the equilibrium price will depend on the extent of the decrease in demand and supply. If the decrease in demand is more than the decrease in supply, then the equilibrium price will decrease. On the other hand, if the decrease in supply is more than the decrease in demand, then the equilibrium price will increase. Therefore, the equilibrium quantity of eggs will decrease, and the equilibrium price may increase or decrease depending on the relative magnitudes of changes in demand and supply.

A Decrease in the Demand for Eggs Due to Changes