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Question

A decrease in demand and increase in supply causes the equilibrium price to __________.


A
Rise
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B
Fall
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C
Remain constant
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D
Indeterminate
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Solution

The correct option is C Fall

A decrease in demandand an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined.
For any quantity, consumers now place a lower value on the goods, and producers are willing to accept a lower
price; therefore, the price will fall.


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