Question

Demand for product sharply decreases. As a result, companies produce less of the product. What happens to the equilibrium price and quantity?

a. Quantity increases, price increases

b. Quantity increases, price is indeterminate

c. Quantity increases, price decreases

d. Quantity decreases, price is indeterminate

Answer 1

When the demand for a product sharply decreases, the equilibrium quantity and price both decrease.

Step-by-step explanation:

When the demand for a product sharply decreases, companies produce less of the product. This leads to a decrease in the equilibrium quantity and a decrease in the equilibrium price.