Suppose that both the supply of beer and the demand for beer decrease.One can predict that the
A) equilibrium price will rise but the equilibrium quantity can increase or decrease.
B) equilibrium price and quantity will decrease.
C) equilibrium price and quantity will rise.
D) equilibrium quantity will fall but the equilibrium price can rise or fall.
E) change in price and quantity are both unknown.

Question

Quizplus · Accepted Answer

When both the supply and demand for beer decrease, the equilibrium quantity of beer will fall. However, the equilibrium price can either rise or fall depending on the magnitude of the shifts in supply and demand. If the decrease in supply is greater than the decrease in demand, then the equilibrium price will rise. Conversely, if the decrease in demand is greater than the decrease in supply, then the equilibrium price will fall. Therefore, we can predict that the equilibrium quantity will fall and the equilibrium price can either rise or fall.

Suppose That Both the Supply of Beer and the Demand