Question

What will be the effect on equilibrium price if supply is decreased without any change in demand?

• A. No change in price
• B. Price will fall
• C. Price will rise
• D. None of the above

Answer 1

Answer: (C)

Price will rise

In case when the supply is reduced and demand is the same price of the goods will reduce. This is because when supply increases and demand is less to bring the market in equilibrium the price is reduced so that demand increases and market reaches to equilibrium.