Question

When both supply and demand decrease, the equilibrium price: a. increases and equilibrium quantity increases. b. is indeterminate and equilibrium quantity increases. c. decreases and equilibrium quantity is indeterminate. d. increases and equilibrium quantity is indeterminate. e. is indeterminate and equilibrium quantity decreases.

Answer 1

Answer:

The answer is e.

Explanation:

First you draw a supply and demand graph. When you move to the left on the graph, you decrease and when you move to the right, you increase. Being that both supply and demand will decrease, you will end up in the left triangle of the original graph. In that area, you can't really decide the price because it's not clear if it increases or decreases. It is clear that the quantity decreases. So (e) is the answer.