Answer to Question #114897 in Microeconomics for kashan

Question

3. How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged?
Use supply and demand curves to verify your answers.
a. Supply decreases and demand is constant.
b. Demand decreases and supply is constant.

Answer 1

a. Supply decreases and demand is constant.

The equilibrium quantity will increase and the equilibrium price will decrease. The figure below describes the situation.

b. Demand decreases and supply is constant.

The equilibrium quantity decrease and the equilibrium price decrease.