If Supply Decreases for a Given Demand Curve, ______

question 186

Multiple Choice

If supply decreases for a given demand curve, ______

• A) there will be an excess quantity demanded in the market, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity.
• B) there will be an excess quantity supplied in the market, resulting in a decrease in the equilibrium price and an increase in the equilibrium quantity.
• C) there will be an excess quantity demanded in the market, resulting in an increase in both the equilibrium price and quantity.
• D) there will be an excess quantity supplied in the market, resulting in a decrease in both the equilibrium price and quantity.
• E) price will fall, shifting the demand curve outward and raising the equilibrium quantity.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, opposite to normal goods.

Income Elasticity

A measure of how much the quantity demanded of a good responds to a change in consumers' income, holding all other factors constant.

Expenditures Decline

A situation where there is a reduction in spending by individuals, businesses, or governments.

Elastic Demand

A condition where the demand for a product is significantly responsive to changes in its price.