A decrease in the supply results in many buyers competing for very few goods. If the demand is constant, the quantity supplied and price have an indirect relationship. A decrease in the volume of supplied results in an increase in price. Many buyers will be competing for a few products causing the equilibrium price to increase.
A decrease in supply will cause the quantity available for buyers to buy to decline. Consequently, the volume purchased will be fewer. Equilibrium quantity will, therefore, decrease.
Economies of scales is characteristic of certain business in which the average cost (the cost of every produced unit of an specific good or service, which equals total cost divided by all units produced) declines as the amount of the product increases.
This happens for example, in business that have a high cost of initial investment and low operating cost. Because of the initial investment, the average cost of the first units (which is the result of dividing total cost into all the units that have been produced until that moment), is relatively high because there is a high investment divided into relatively few units of production. This cost decreases while product increases because the cost of investment is distributed into more units, and the operating cost do not increase cost substantially.
