When Supply and Demand for a Product Decrease Simultaneously, We

question 43

Multiple Choice

When supply and demand for a product decrease simultaneously, we

• A) can predict that both equilibrium price and quantity will increase.
• B) can predict that both equilibrium price and quantity will decrease.
• C) cannot predict equilibrium price, but know that equilibrium quantity will decrease.
• D) cannot predict the change in either the equilibrium quantity or equilibrium price.

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Definitions:

Indifference Curves

Graphical representations in economics showing combinations of goods that give the consumer equal satisfaction and utility.

Utility Function

A utility function is a mathematical representation of a consumer’s preferences, ranking different bundles of goods according to levels of satisfaction.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, meaning they would derive the same level of satisfaction from any combination.

Bliss Point

The optimal quantity of consumption where any further increase or decrease would lead to a lower level of satisfaction for the consumer.