Suppose that initially, the equations for demand and supply are Qd = 48 − 4P and Qs = 4P − 16, respectively. If the quantity supplied decreases by 4 at every price (so that the supply curve shifts to the left), the equilibrium price will change from:
A) $8 to $7.50.
B) $8 to $8.50.
C) $8.50 to $7.50.
D) $7.50 to $8.50.

Question

Quizplus · Accepted Answer

Initially, set Qd = Qs to find equilibrium: 48 - 4P = 4P - 16, solving gives P = 8. With supply decreasing by 4, the new supply equation is Qs = 4P - 20. Setting the new Qs equal to Qd: 48 - 4P = 4P - 20, solving gives P = 8.5. Thus, the price changes from $8 to $8.50.

Suppose That Initially, the Equations for Demand and Supply Are