There has been a decrease in the supply of cheese in the market for cheese, as shown here. The initial supply curve is labeled $S_{1}$ and the new supply curve is labeled $S_{2}$.

What will be the new equilibrium as a result of the decrease in supply?
Choose 1 answer:
(A) $E_{2}$
(B) $P_{A}, Q_{Y}$
(c) $P_{B}, Q_{Y}$
(D) $E_{1}$
(E) $P_{B}, Q_{X}$

Question

There has been a decrease in the supply of cheese in the market for cheese, as shown here. The initial supply curve is labeled $S_{1}$ and the new supply curve is labeled $S_{2}$.

What will be the new equilibrium as a result of the decrease in supply?
Choose 1 answer:
(A) $E_{2}$
(B) $P_{A}, Q_{Y}$
(c) $P_{B}, Q_{Y}$
(D) $E_{1}$
(E) $P_{B}, Q_{X}$

Accepted Answer

∻Solution∻ ‖ a ⋮ Initial Equilibrium: The initial equilibrium point is $E_1$, where the initial supply curve $S_1$ intersects the demand curve $D_1$. This corresponds to the price $P_a$ and quantity $Q_y$. ‖ ‖ b ⋮ Decrease in Supply: The supply curve shifts leftward from $S_1$ to $S_2$, indicating a decrease in supply. ‖ ‖ c ⋮ New Equilibrium: The new equilibrium point is $E_2$, where the new supply curve $S_2$ intersects the demand curve $D_1$. This corresponds to the price $P_b$ and quantity $Q_x$. ‖ ∻Answer∻ ⚹ (E) $P_{B}, Q_{X}$ ⚹ ∻Key Concept∻ ⚹ Market Equilibrium ⚹ ∻Explanation∻ ⚹ When the supply decreases, the supply curve shifts to the left, leading to a higher equilibrium price and a lower equilibrium quantity. The new equilibrium is determined by the intersection of the new supply curve and the existing demand curve. ⚹◊What effect would an increase in the price of cheese have on the equilibrium in the market for cheese, according to the model you described?⍭ Generate me a similar question◊

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