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8_murik_8 [283]
3 years ago
7

What happens to equilibrium price and quantity when there is a simultaneous decrease in demand and decrease in supply?

Business
1 answer:
motikmotik3 years ago
3 0

Answer:

The equilibrium price will remain the same while equilibrium quantity will decrease

Explanation:

The effect on equilibrium price and quantity of a simultaneous decrease in demand and decrease in supply will depend on whether both price and quantity change in the same proportion or whether one charge is larger or smaller than the other.

I assume in this question that the equilibrium price and quantity decreased in the same proportion.

From the figure in the attached file,, we will see that the initial state of demand and supply curves are shown by curve DD and SS respectively and the decrease in demand is shown in curve D1D1 and a decrease in supply is shown in curve S1S1.

it will be observed that though there is a decrease in demand from Q0 to Q1 but the equilibrium price remain the same.

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