Final answer:
When supply falls, the quantity demanded at the new higher equilibrium price is lower due to the leftward shift of the supply curve, resulting in a movement along the demand curve to a new equilibrium point.
Step-by-step explanation:
When supply falls, the supply curve shifts to the left, leading to a higher equilibrium price and a lower equilibrium quantity when intersecting the demand curve. However, the question is about the quantity demanded in equilibrium. In this case, when supply falls, the new equilibrium point typically results in a higher equilibrium price and the quantity demanded at this price is therefore lower compared to the initial equilibrium. So, the correct answer is A. falls. This change reflects the movement along the demand curve due to the new price level established by the reduction in supply.
It's important to note that demanders and suppliers adjust their behavior based on the new market conditions. While the shift is going on in the supply curve, the change in equilibrium results in a movement along the demand curve, rather than a shift of the demand curve itself. This process results in an adjustment in both the equilibrium price and quantity demanded.