CA Foundation · Business Economics · Theory of Demand and Supply
If the demand for a good is unchanged and its supply curve shifts to the left, which of the following describes the new equilibrium?
A leftward shift of supply with unchanged demand raises the equilibrium price and lowers the equilibrium quantity. Sellers offer less at each price, creating excess demand at the old price, which pushes price up and reduces the quantity bought along the demand curve.
- AHigher equilibrium price and lower equilibrium quantityCorrect
- BLower equilibrium price and higher equilibrium quantity
- CHigher equilibrium price and higher equilibrium quantity
- DLower equilibrium price and lower equilibrium quantity
Explanation
A leftward supply shift means less is offered at every price. At the old price there is excess demand, which bids the price up. As price rises, quantity demanded contracts along the demand curve, so the new equilibrium quantity is lower than before.
Did you get it right without looking?
One question tells you little. A timed set on Theory of Demand and Supply shows your real accuracy, how long you take and where you lose marks.
More Theory of Demand and Supply questions
- A firm's supply schedule shows that it supplies 200 units at ₹20 per unit and 300 units at ₹25 per unit. Using the percentage method with th…
- In Indian cities, the price of petrol rises and, as a result, the number of litres bought per month by a household falls, while its income, …
- A consumer's demand for premium coffee increases when the price of tea falls. Which of the following best describes the relationship between…
- Rahul's demand for a branded phone is given by Q = 100 − 2P at the current income. When his income rises, the demand becomes Q = 120 − 2P. A…
- A cinema in Pune reduces its ticket price from ₹250 to ₹200 and finds that its total revenue from ticket sales falls. What can be concluded …
- Which of the following correctly describes a 'contraction of supply' in economic terms?