Unformatted text preview: lead to increased price; the quantity sold, however, would remain ambiguous, depending on the magnitude of the change of both supply and demand. A decrease in demand and no change on the supply side can only lead to one simple conclusion: a decrease in both P and Q. A decrease in demand combined with an increase in supply will drive the price down, as the two lines would meet at a lower point, since they’d be shifted towards each other; whether quantity sold would increase or decrease remains ambiguous, depending on the degree of shift on both the supply and the demand side. The final scenario would be a decrease in both supply and demand. This event would definitely drive the quantity sold down; the price remains ambiguous though, since the point of equilibrium could lead sellers to push for higher prices, depending on the magnitude of the shifts of both supply and demand relative to each other....
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This note was uploaded on 06/26/2008 for the course ECON S-10ab taught by Professor Medoff during the Summer '07 term at Harvard.
- Summer '07