Home › CA Foundation › Business Economics › Supply › If the supply of bottled water decreases while d…
If the supply of bottled water decreases while demand stays the same, the new market equilibrium will show:
Aa lower price and a higher quantity
Ba lower price and a lower quantity
Ca higher price and a lower quantity
Da higher price and a higher quantity
Answer & Solution
Correct answer: C. a higher price and a lower quantity
1. A decrease in supply shifts the supply curve to the left.
2. Against an unchanged demand curve, the intersection moves up and to the left.
3. Up means a higher equilibrium price; left means a lower equilibrium quantity.
4. So the equilibrium price rises and quantity falls.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.11_
Related questions
A noted exception to the law of supply is the supply of labour, where at very high wage raAn increase in the number of firms selling a good in a market, other things constant, willSocial efficiency in a competitive market is achieved at the equilibrium price because at Producer surplus in a market is best described as the benefit producers gain because the pIf, at the prevailing price, the quantity demanded of a good exceeds the quantity suppliedIn a market, the demand and supply schedule shows that at Rs 3 quantity demanded equals quThe market price of a good is the level at which the wishes of buyers and sellers coincideA short-run supply schedule for fighter aircraft shows 28 units offered at every price fro