At an initial equilibrium, demand curve shifts to the left, supply curve remain unchanged. This creates ______________ and prices will _______________ restore the market equilibrium.

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BlackTom AI · Accepted Answer

First, let's restate the scenario in plain terms: the demand curve shifts to the left while the supply curve stays the same. This reduces overall quantity demanded at every price, creating an excess of supply (a surplus) at the original equilibrium price. 
Option 1: 'surplus; fall' correctly identifies that a leftward shift in demand generates a surplus when supply is unchanged, and the market responds by lowering prices to clear the excess stock, restoring equilibrium.
Option 2: 'surplus; rise' would imply that prices move up in response to a surplus, which contradicts the basic market adjustment mechanism where excess supply puts downward pressure on price to clear the surplus.
Option 3: 'shortage; remain unchanged' would occur if demand rose or supply fell, not if demand fell. With a leftward shift in demand and unchanged supply, you do not get a shortage, so this is inconsistent with the scenario and price dynamics.
Option 4: 'shortage; fall' suggests prices fall but that a shortage exists, which would only happen if demand increased or supply decreased. Since demand decreased, a shortage is not the result; the surplus condition is the appropriate outcome, so this option is incorrect.
In summary, the leftward shift in demand while supply is fixed creates surplus, and the market lowers price to restore equilibrium, making option 1 the correct choice.

At an initial equilibrium, demand curve shifts to the left, supply curve remain unchanged. This creates and prices will _ restore the market equilibrium.

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At an initial equilibrium, demand curve shifts to the left, supply curve remain unchanged. This creates ______________ and prices will _______________ restore the market equilibrium.

View Explanation

Log in for full answers

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At an initial equilibrium, demand curve shifts to the left, supply curve remain unchanged. This creates and prices will _ restore the market equilibrium.

At an initial equilibrium, supply curve shifts to the left, demand curve remain unchanged. This creates and prices will _ restore the market equilibrium.