Final answer:
A decrease in the market price caused by a change in supply will increase the quantity demanded according to the law of demand. This is observed in both the product and labor markets and is similarly impacted by changes in demand and supply, affecting equilibrium price and quantity.
Step-by-step explanation:
Other things equal, a decrease in the market price caused by a change in supply will likely result in an increase in the quantity demanded. This is explained by the law of demand, which states that there is an inverse relationship between price and quantity demanded, meaning as price decreases, the quantity demanded typically increases. However, a decrease in market price due to an increase in supply does not necessarily mean there will be an increase in the quantity supplied at that lower price; in fact, suppliers may be inclined to supply less at the lower price.
Looking at the effects of changes in supply or demand in the product or labor market:
- An increase in demand will typically raise both equilibrium price and quantity.
- A decrease in demand will generally lower equilibrium price and quantity.
- An increase in supply will generally lower equilibrium price but increase quantity.
- A decrease in supply will usually raise equilibrium price but decrease quantity.