When supply decreases and demand stays the same, what happens to the equilibrium point of price and quantity? Choose 2 answers.

Rationale

Price increases and quantity decreases.

When supply decreases while demand remains constant, the equilibrium price tends to rise due to the reduced availability of goods, while the equilibrium quantity typically falls because fewer goods are being supplied to the market.

A (Quantity remains the same.) YOUR ANSWER

This choice is incorrect because a decrease in supply without a change in demand leads to a shift in the equilibrium point. As supply decreases, there are fewer goods available, which cannot maintain the same equilibrium quantity.

B (Price remains the same.) YOUR ANSWER

This option is incorrect because a constant demand alongside a decrease in supply will lead to higher prices. The reduced supply creates upward pressure on prices, making it impossible for the equilibrium price to remain stable.

C (Quantity increases.) YOUR ANSWER

This choice is incorrect as well. A decrease in supply implies that there are fewer products available in the market. Hence, the equilibrium quantity cannot increase; it must decrease as a result of the supply reduction.

D (Price increases.) CORRECT

This is a correct statement. With a decrease in supply and unchanged demand, the scarcity of goods drives the price up as consumers are willing to pay more to secure the limited available products.

E (Quantity decreases.) CORRECT

This is also a correct statement. A decrease in supply naturally results in a lower equilibrium quantity since there are fewer goods available for consumers to purchase.

F (Price decreases.) YOUR ANSWER

This choice is incorrect because a decrease in supply, with demand held constant, exerts upward pressure on prices. Therefore, prices cannot decrease in this scenario.

Conclusion

In summary, when supply decreases while demand remains unchanged, the equilibrium price will increase and the equilibrium quantity will decrease. The interplay between supply and demand dictates these shifts, ensuring that consumers face higher prices for fewer available goods. Understanding this relationship is crucial for analyzing market dynamics and predicting changes in economic conditions.

When supply decreases and demand stays the same, what happens to the equilibrium point of price and quantity? Choose 2 answers.

Price increases and quantity decreases.

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