When supply decreases,
A) price falls with no change in quantity demanded.
B) price rises and quantity demanded decreases.
C) price falls and quantity demanded increases.
D) demand decreases so that price remains the same.
E) price rises and demand increases.

Question

Quizplus · Accepted Answer

When supply decreases, there is less of a product available in the market, which results in an increase in the price of the product due to the higher demand. As a result, the quantity demanded decreases because consumers are less willing to pay the higher price. Therefore, both the price and quantity demanded move in the same direction (price increases and quantity demanded decreases).

When Supply Decreases