Question 15
Price DeterminationA decrease in supply without a corresponding change in demand will lead to
- A.an increase in equilibrium price and a decrease in equilibrium quantity
- B.a decrease in equilibrium price and an increase in equilibrium quantity
- C.a decrease in equilibrium price and equilibrium quantity
- D.an increase in equilibrium price and quantity
Show the answer and explanation
Answer: A (an increase in equilibrium price and a decrease in equilibrium quantity)
Explanation
The supply curve shifts left along an unchanged demand curve, so price rises and the quantity traded falls.