If we observe a fall in the equilibrium price of product A, we know that either the demand for A has
A) increased or the supply of A decreased or both.
B) increased or the supply of A increased or both.
C) decreased or the supply of A increased or both.
D) decreased or the supply of A decreased or both.
E) none of the above.

Question

Quizplus · Accepted Answer

A fall in the equilibrium price of product A indicates that either the demand for A has decreased (leading to lower prices as consumers are less willing to buy the product at higher prices) or the supply of A has increased (leading to lower prices as more of the product is available, which can drive prices down), or both these conditions are happening simultaneously.

If We Observe a Fall in the Equilibrium Price of Product