A decrease in demand and a decrease in supply, will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price.

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BlackTom AI · Accepted Answer

To approach this question, I will assess how simultaneous shifts in both demand and supply affect the equilibrium.
Option a: increase; indeterminate change. An increase in equilibrium quantity would require the combined shifts to raise the quantity traded. Since demand decreases, it tends to reduce quantity demanded, not increase it. This makes an overall increase in equilibrium quantity unlikely. Hence this option is incorrect.
Option b: indeterminate change; increase. A price increase would usually accompany a leftward shift in supply or a rightward shift in demand; here both demand and supply shift left (decrease). The demand decrease tends to lower quantity demanded and put downward pressure on price, while the supply decrease reduces quantity supplied and tends to raise price. These opposing effects on price make the net change in price indeterminate, but the quantity is still unlikely to rise because demand has fallen. Therefore this option is also incorrect on the quantity part and partially incorrect on price.
Option c: indeterminate change; decrease. The price change is indeterminate due to offsetting effects, which matches the general intuition for price when both curves shift left. However, the equilibrium quantity typically declines when both demand and supply decrease since each curve moves to the left, reducing the amount traded at the intersection. While there could be edge cases where the magnitude and slopes align to keep quantity unchanged, those are special cases rather than the general outcome. This makes the “indeterminate” for quantity inaccurate in standard analysis. This option is not the best fit.
Option d: decrease; indeterminate change. This option asserts a clear decrease in equilibrium quantity, which aligns with the standard result: shifting both curves left reduces the quantity traded. It also correctly states that the equilibrium price becomes indeterminate because the relative magnitudes of the shifts determine whether price rises, falls, or stays the same. This combination matches the typical outcome in introductory supply-and-demand analysis.
Option e: no change; no change. With both curves moving left, it is highly unlikely that both quantity and price would remain unchanged; at least the quantity is expected to move, so this option is incorrect.

Academic Courses Test#1

A decrease in demand and a decrease in supply, will lead to a(n) in equilibrium quantity and a(n) in equilibrium price.

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