Suppose Both Demand and Supply Decrease

question 207

Multiple Choice

Suppose both demand and supply decrease. How do the equilibrium price and quantity change?

• A) Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
• B) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
• C) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
• D) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

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Definitions:

Physical Count

The process of manually counting and verifying the actual inventory in a business at a specific point in time.

Weighted Average Inventory Valuation

A method for valuing inventory by calculating the average cost of all inventory items, weighted by the quantities of each item.

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Sales Revenue

The total income received by a company from its sales of goods or services, before any expenses are subtracted.