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With demand held constant, a decrease in supply caused by obsolete technology will lead to:
AA lower equilibrium price and a higher quantity traded
BA higher equilibrium price and a lower quantity traded
CA higher equilibrium price and a higher quantity traded
DA lower equilibrium price and a lower quantity traded
Answer & Solution
Correct answer: B. A higher equilibrium price and a lower quantity traded
1. A leftward shift of supply leaves a deficit at the old price.
2. The shortage forces the equilibrium price up.
3. As price rises, quantity demanded falls, so less is bought and sold.
4. Price up and quantity down means option B is correct.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit II "Determination of Prices", p.4_
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