If the supply of a good decreases while demand remains constant, what happens to

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Question: If the supply of a good decreases while demand remains constant, what happens to the equilibrium price?

Options:

Correct Answer: Equilibrium price increases

Solution:

If supply decreases while demand remains constant, there will be a shortage, leading to an increase in the equilibrium price.

If the supply of a good decreases while demand remains constant, what happens to the equilibrium price?

If the supply of a good decreases while demand remains constant, what happens to the equilibrium price?

Step 1: Understand what supply and demand mean. Supply is how much of a good is available, and demand is how much people want that good.
Step 2: Recognize that when supply decreases, there are fewer goods available for sale.
Step 3: Note that if demand stays the same, people still want the same amount of the good.
Step 4: Realize that with fewer goods available but the same number of people wanting them, there will not be enough goods for everyone.
Step 5: Understand that this situation creates a shortage, where demand exceeds supply.
Step 6: When there is a shortage, sellers can raise prices because people are willing to pay more to get the limited goods.
Step 7: Conclude that the equilibrium price, which is the price at which supply and demand balance, will increase due to the shortage.

Supply and Demand – Understanding how changes in supply and demand affect market equilibrium.
Equilibrium Price – The price at which the quantity supplied equals the quantity demanded.
Market Shortage – A situation where demand exceeds supply, leading to upward pressure on prices.