Question

explain with the help of a diagram the effect of decrease in demand for a commodity on its equilibrium price and quantity​

Answer 1

In the given figure, DD and SS are the initial demand curve and supply curve respectively. E is the initial equilibrium point, OQ is the equilibrium quantity and OP is the equilibrium price. Decrease in demand implies a shift in demand curve to the left. This sets in the following chain of effects. Decrease in demand implies that less is demanded at the existing price.

Given the supply, price of the commodity will tend to decrease . Fall in price will cause extension of demand and contraction of supply. Here, equilibrium quantity also decreases.