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 shortage because $Q_{S}Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity.

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 shortage because $Q_{S}Q_{D}$ at the old price. Price will adjust upward until the market clears at a new lower quantity.

Accepted Answer

***B*** ∻Key Concept∻ ⚹Supply and Demand Equilibrium⚹ ∻Explanation∻ ⚹When supply decreases, the quantity supplied at the original price is less than the quantity demanded, creating a shortage ($Q_{S}

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