Final answer:
When demand decreases, both equilibrium price and quantity decrease. The demand curve shifts leftward leading to a lower price and quantity level at the new equilibrium. This outcome applies to both the product and labor markets when other factors remain constant.
Step-by-step explanation:
When demand for a product sharply decreases, the effect on the equilibrium price and quantity in a market can be analyzed using the principles of supply and demand. A decrease in demand implies that consumers are less willing or able to purchase the product at various price levels, causing a leftward shift in the demand curve. This shift results in a new equilibrium where both the equilibrium quantity and equilibrium price are lower than before, as businesses adjust production to meet the lower demand.
In simple terms, if companies produce less due to a decrease in demand, the equilibrium quantity would decrease, and the equilibrium price would also typically decrease, assuming all other factors remain constant. The specific outcomes for the product market or labor market can vary based on different combinations of shifts in demand and supply, reflected in the aforementioned four possibilities: increase or decrease in demand, and increase or decrease in supply.