A decrease in demand causes the equilibrium price to _____.

rise

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fall

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remain constant

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intermediate

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Solution

The correct option is B fall
A decrease in demand causes the equilibrium price to fall. This can be understood with the help of the graph. The equilibrium is the point where the demand and supply meet. So the equilibrium is at price P₀and quantity Q₀. Now the demand falls from D₀to D₁and hence the equilibrium price and quantity will also fall.

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