Which of the following best describes the sequences of events that lead to a price increase and quantity decrease when supply decreases? Choose 1 answer: (A) When supply decreases, there is a shortage because $Q_{S}Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity. (B) When supply decreases, there is a surplus because $Q_{S}Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity. (c) When supply decreases, there is a shortage because $Q_{S}

Question

Which of the following best describes the sequences of events that lead to a price increase and quantity decrease when supply decreases? Choose 1 answer: (A) When supply decreases, there is a shortage because $Q_{S}>Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity. (B) When supply decreases, there is a surplus because $Q_{S}>Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity. (c) When supply decreases, there is a shortage because $Q_{S}

Accepted Answer

∻Solution∻ ‖ a ⋮ When supply decreases, the quantity supplied ($Q_S$) becomes less than the quantity demanded ($Q_D$) at the old price, creating a shortage. ‖‖ b ⋮ The shortage causes upward pressure on the price, leading to an increase in price. ‖‖ c ⋮ As the price increases, the quantity demanded decreases, and the market moves towards a new equilibrium with a higher price and lower quantity. ‖ ∻Answer∻ ⚹ (C) When supply decreases, there is a shortage because $Q_{S}

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