What will be the effects of a decrease in both the market demand and supply of a commodity on its price? Explain.

Open in App

Solution

There are 3 cases of decrease in demand and supply.
1) When both demand and supply decrease in the equal proportion the price will remain same but the equilibrium quantity will decrease.
2) When decrease in demand is more than the decrease in supply both equilibrium quantity and price will decrease.
3) When decrease in demand is less than decrease in supply the equilibrium price will rise and equilibrium quantity will increase.

Suggest Corrections

Similar questions

Explain the effects of an increase in both demand and supply of a commodity on its equilibrium price.

Q. What can be the effects on the equilibrium price of a commodity when its demand and supply curves both shift to the right simultaneously?

If the demand for a commodity increases and the supply decreases, what will be the effect on equilibrium price and quantity? Illustrate with diagrams.

Explain the effect of a simultaneous decrease in both demand and supply on equilibrium price and quantity.

Q.
What will be the effect on equilibrium price and quantity of an increase in equal proportion of demand and supply of a commodity?

Join BYJU'S Learning Program