Final answer:
A decrease in supply along a given demand curve results in an excess quantity demanded, which increases the equilibrium price and decreases the equilibrium quantity.
The correct option is:
a) An excess quantity demanded will be created, increasing the equilibrium price and causing equilibrium quantity to fall.
Step-by-step explanation:
When considering what happens if supply decreases along a given demand curve, we need to examine the effects on the market equilibrium. The equilibrium price and equilibrium quantity occur where the supply and demand curves intersect, representing a state of balance where the quantity demanded equals the quantity supplied. A decrease in supply leads to a leftward shift of the supply curve.
Given this movement, a new equilibrium is established at a different price and quantity level. The result of a decrease in supply, holding demand constant, is an excess quantity demanded at the original equilibrium price. Because the quantity supplied is now lower at each possible price, this excess demand creates upward pressure on the price. Eventually, the price will rise to a new, higher equilibrium level where the quantity demanded and quantity supplied are again in balance. However, the equilibrium quantity will fall because at the new higher price, less quantity is demanded.
Therefore, the correct answer to the question is: a) An excess quantity demanded will be created, increasing the equilibrium price and causing equilibrium quantity to fall, as the new higher price rations the now scarcer supply among the competing demands.