Question

Equilibrium quantity must decrease when demand ________?

1) increases
2) decreases
3) remains constant
4) cannot be determined

Answer 1

The equilibrium quantity decreases when demand decreases. This principle applies to both product and labor markets, and changes in demand or supply affect equilibrium price and quantity differently.

Step-by-step explanation:

The equilibrium quantity must decrease when demand decreases. In the context of both product and labor markets, several scenarios can affect equilibrium price and quantity.

• If there is an increase in demand, the equilibrium price and quantity generally rise.
• When there is a decrease in demand, the equilibrium price and quantity tend to fall.
• An increase in supply typically leads to a lower equilibrium price, while the equilibrium quantity increases.
• Conversely, a decrease in supply results in a higher equilibrium price and a reduced equilibrium quantity.

These relationships between supply, demand, and equilibrium establish the fundamental dynamics of market economics.