Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases
B
It decreases
C
It remains unchanged
D
It fluctuates
Understanding the Answer
Let's break down why this is correct
Answer
When demand falls but supply stays the same, sellers have more goods than buyers want, so they lower prices to attract customers. The market moves to a new equilibrium where the lower price meets the reduced quantity demanded. This means the equilibrium price drops and the quantity sold also goes down. For example, if a popular smartphone’s demand drops because a newer model appears, retailers lower the price and sell fewer units. Thus, a decrease in demand while supply is unchanged causes the equilibrium price to fall.
Detailed Explanation
When demand falls, the demand curve moves left. Other options are incorrect because Some think that less demand makes sellers raise prices to cover costs; It is easy to think that supply alone decides price.
Key Concepts
Equilibrium price
Demand curve
Topic
Market Equilibrium Analysis
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1If the demand for loanable funds increases while the supply remains unchanged, what is likely to happen to the equilibrium interest rate?
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2
Question 2What happens to the market equilibrium price if there is an increase in demand while supply remains constant?
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3
Question 3How does an increase in the price of a good affect its market equilibrium when the demand for that good is inelastic?
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4
Question 4If an increase in the cost of production leads suppliers to offer less at every price level, how will this affect the market equilibrium price and quantity?
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5
Question 5If the demand for a product increases while supply remains constant, what is likely to happen to the market equilibrium price?
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