When both supply and demand decrease, the equilibrium price ________ and the equilibrium quantity ________.

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Question restatement: When both supply and demand decrease, the equilibrium price ________ and the equilibrium quantity ________.

Option a: 'is indeterminate; increases' This would imply that despite both curves shifting left, the price could go either up or down, but the quantity would not increase. Since both curves shifting left typically reduce quantity, an increase in price accompanied by an indeterminate price direction is not supported by standard results. Hence this option is inconsistent with the general effect on quantity and doubtful about price direction.

Option b: 'is indeterminate; decreases' This option asserts that price direction cannot be determined from the shifts alone, while quantity definitively falls. Indeed, when both curves shift left, the quantity traded definitely declines because there are fewer trades at any given price. The price outcome depends on the relative magnitudes of the shifts in supply and demand, so it can rise, fall, or stay the same; thus price is indeterminate. This aligns with common supply-demand analysis: double leftward shift leads to a lower quantity, but price is ambiguous.

Option c: 'decreases; is indeterminate' This would claim that the price falls in response to the leftward shifts, but the quantity effect is indeterminate. While it’s possible for price to fall if the demand decrease dominates, the quantity effect for both curves shifting left is not indeterminate; it is clear that quantity decreases. Therefore this option misstates the quantity outcome.

Option d: 'increases; increases' This asserts both price and quantity rise. Since both curves shifting left reduce quantity, claiming an increase in quantity is incorrect. Additionally, price direction is not guaranteed to rise; thus this option is clearly inconsistent with the simultaneous leftward shifts.

Summary: The only aspect we can be confident about is that the equilibrium quantity decreases when both supply and demand decrease, because there are fewer transactions overall. The equilibrium price, however, depends on which curve shifts more, so its direction is not determined without magnitudes. Therefore, the statement that price is indeterminate and quantity decreases best captures the standard outcome in this scenario.

MCD2020 - T1 - 2025 Homework Quiz 2- Market Forces of Supply and Demand

When both supply and demand decrease, the equilibrium price and the equilibrium quantity .

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MCD2020 - T1 - 2025 Homework Quiz 2- Market Forces of Supply and Demand

When both supply and demand decrease, the equilibrium price ________ and the equilibrium quantity ________.

查看解析

登录即可查看完整答案

类似问题

Price decreases for a product are most likely to occur when

Assume that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?

Which of the following describes how a market will respond when the scarcity of a good increases?

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

In the coffee market, which of the following changes will increase the price and decrease the quantity of coffee?

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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.

Due to the Covid-19 Pandemic, the demand for face masks and sanitizers have greatly increased which also increased the price for these products by 50%. Which of the following statements is true?

更多留学生实用工具

希望你的学习变得更简单

When both supply and demand decrease, the equilibrium price and the equilibrium quantity .

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.