Page 3 - Home Assignment-Price determination

Impact on equilibrium price and output when there is a simultaneous
decrease in both demand and supply: -

 Case-1
If decrease in demand is more than decrease in supply then the
equilbrium price and the equilibrium quantity will fall.

Y

X

As decrease in demand is more than the decrease in supply then it
will create stock in the market. In order to overcome the stock the

equilibrium price will fall to OP 2 and quantity will decrease
2
toOq respectively.
 Case-2
If decrease in demand is equal todecrease in supply then the

equilbrium price will remain constant but the equilibrium quantity
will fall.
Y

X

As decrease in demand is equal to the decrease in supply then it
will create neither any stock or any deficit in the market. As a