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

Question

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 ⋮ Due to the shortage, the price will adjust upward as consumers are willing to pay more to obtain the product. ‖ ‖ c ⋮ The market will clear at a new equilibrium where the quantity supplied equals the quantity demanded, but at a higher price and a lower quantity than before. ‖ ∻Answer∻ ⚹ (C) When supply decreases, there is a shortage because $Q_{S}

Sia