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Question
Macroeconomics
Posted 3 months ago
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 QS>QDQ_{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 QS<QDQ_{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 surplus because QS<QDQ_{S}<Q_{D} at the old price. Price will adjust upward until the market clears at a new lower quantity.
(D) When supply decreases, there is a surplus because QS>QDQ_{S}>Q_{D} at the old price. Price will adjust upward until the market clears at a new lower quantity.
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Answer from Sia
Posted 3 months ago
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 (QS<QDQ_{S}<Q_{D}). This shortage puts upward pressure on the price, leading to a new equilibrium with a higher price and a lower quantity

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