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

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Question restatement: At an initial equilibrium, a leftward shift of the supply curve occurs while demand stays the same. This creates __________ and prices will __________ to restore the market equilibrium.

Option 1: 'shortage; rise' — A shortage would occur if there were excess demand relative to supply, which would push prices up. However, a leftward shift in supply reduces quantity supplied at each price, creating excess supply, not excess demand. Therefore this option misidentifies both the type of imbalance and the direction of price change.

Option 2: 'surplus; fall' — This matches the standard outcome of a leftward (decrease) shift in supply with demand unchanged: at the original equilibrium price and quantity, quantity supplied exceeds quantity demanded, creating a surplus. The surplus pressure drives prices downward to clear the excess supply and restore equilibrium. This option correctly identifies both the imbalance (surplus) and the direction of price adjustment (fall).

Option 3: 'surplus; remain unchanged' — While the first part correctly notes a surplus, the second part incorrectly states that prices would remain unchanged. In a typical market with surplus, prices move downward to eliminate the excess supply, so the price would not stay unchanged.

Option 4: 'shortage; fall' — A shortage implies quantity demanded exceeds quantity supplied, which would normally push prices up, not down. Since the supply decrease creates a surplus rather than a shortage, this option describes an inconsistent combination of imbalance and price movement.

Summary: Among the options, only the second statement aligns with the economic logic of a leftward shift in supply causing a surplus and a falling price as the market moves toward a new equilibrium.

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

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

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